Australian shares retreated for the first session in four as caution heading into the long weekend was compounded by fears that China's unexpected rate cut presages grim economic news tomorrow.
At lunchtime the ASX 200 was down 39 points or 1% at 4068 and on track to end the week near last week's close of 4063. All sectors fell back this morning with the heaviest falls coming in gold stocks -3.8%, utilities -1.4%, industrials -1.3% and consumer staples -1.3%.
The falls came after Federal Reserve chairman Ben Bernanke disappointed US traders by giving no hint that the Fed will launch QE3 at its next meeting and after China's first rate cut since 2008 raised concerns about tomorrow's monthly economic update. Bloomberg economist Michael McDonough said the unusual decision to cut rates mid-week suggested "very disappointing" figures tomorrow.
"The concern is that with industrial production and CPI data coming out of China at the weekend that it's indicative of them knowing something about weak data going forward," a currency strategist at Lloyds Bank in the UK told Fairfax.
US futures soured as Asian markets turned south. Japan's Nikkei fell 1.96%, Shanghai 0.24% and Hong Kong's Hang Seng 0.76%. Dow futures were recently off 49 points or 0.3%.
Crude oil futures slumped 74 cents this morning to US$82.83 a barrel. Spot gold was $20.80 weaker at US$1,570.20 an ounce. The dollar was buying 98.59 US cents.
A fourth straight day of gains looked to be a stretch ahead of a long weekend, and so it has proved. Needless to say, our market seems more scared of tomorrow's China update than the Shanghai Composite does. This afternoon will be a real test of the pick-up in risk appetite we've seen over the last two weeks. I once again found a trio of buys that have strayed little from my entry price. Been ahead and been underwater in OZL, AIO and PNA but not enough in either direction to warrant a sell. The plunge in gold miners appears overdone but it's all about QE3, so who knows.
