Australian shares this morning rebounded from their lowest level this week as Asian markets shrugged off fresh evidence a slowdown in China's manufacturing sector.
At lunchtime the ASX 200 was down eight points or 0.2% at 4068 after earlier touching a new low for the week at 4030. Resource stocks fell hardest as traders rotated into defensives such as telecoms +1.6%, property trusts +1% and health +0.9%. Gold stocks lost 1.8%, metals & mining 1.6% and energy 1.5%.
The market reached its nadir this morning after the 11am EST release of Chinese manufacturing data that showed a much sharper slowdown than economists had tipped. The official Purchasing Managers' Index eased from 53.3 in April to 50.4 last month. Economists had been tipping a drop to around 52.1. HSBC's private index, which focuses on smaller companies, was revised downwards from 48.7 to 48.4.
"The aggressive pullback in May's PMI has once again confirmed that the economy is close to stalling," IHS Global Insight economists Xianfang Ren and Alistair Thornton wrote in a note to clients quoted on MarketWatch. "The only reason it kept its head above water this month is likely the string of stimulus moves announced by authorities to combat rediscovered weakness in the economy."
The Australian market pared its losses as Shanghai traders shrugged off the data, perhaps on the basis that the central government would be obliged to stoke the economy to counteract the speed of the slowdown. Shanghai was lately up 0.48%, Japan's Nikkei down 0.74% and Hong Kong's Hang Seng up 0.36%. Dow futures were recently 35 points or 0.3% in the red.
Crude oil futures eased another 23 cents this morning to US$86.27 a barrel. Spot gold was $5.30 softer at US$1,555.80 an ounce. The dollar was buying 96.93 US cents.
The economic news goes from bad to worse but short-term our market looks very much like it's ready to bounce. If today's recovery holds it will mark a third long candlestick tail in a row and that's a bullish sign for next week - provided tonight's US jobs news doesn't make Wall Street drop its bundle. A modest return for the morning here - scalped CFE and ducked in and out of HGO for brokerage. Narrowly ahead in MAH, FXJ and TPI from the lows.
