Shares pared a third day of gains after weak Asian economic news helped push Japanese stocks lower and reverse a rally in US futures.
At lunchtime the ASX 200 was ahead three points or 0.1% at 4390 after running as high as 4411 by mid-morning. Advances in the big banks and miners was partly offset by declines in most of the defensive sectors, including telecoms -1.1%.
"The fact that overseas markets weren't too bad and commodities were in the green I think is giving our resources stocks a bit of a spur," Lonsec senior private client advisor Michael Heffernan told Fairfax. "The market seems to be generally positive. That could be also on the expectation that rates are to be cut tomorrow."
The market initially held its gains following the 11am EST release of Chinese manufacturing data, but faded as the morning wore on. The official Chinese government manufacturing survey showed an improvement last month from August but remained stuck below the 50-point level that separates expansion from contraction. The PMI improved to 49.8 from 49.2.
Japan's Nikkei lost 0.83% after the Bank of Japan's quarterly Tankan survey underlined deteriorating business sentiment among large manufacturers. Shanghai and Hong Kong were both closed for public holidays. Dow futures were recently down 40 points or 0.3%.
Manufacturing activity contracted during September and new orders fell for a seventh month, according to figures released this morning. The AIG manufacturing index dropped 1.2 points to 44.1, with new orders down 4.8 points to 44.3. Inflation remained well below the Reserve Bank's target band, rising 0.2% in September for an annual rate of 2.4%.
Crude oil futures sagged 80 cents this morning to US$91.30 a barrel. Spot gold was $7.70 softer at US$1,765.80 an ounce. The dollar was buying $US1.0329.
It was a "risk off" morning on most markets (oil, gold, Japan, dollar), so the rally on the XJO looked a bit optimistic - perhaps a mix of hope for tomorrow's rates meeting and some take-over-target hunting on the back of the ARI offer. My low expectations for the day have been met - no buys/sells as yet. I can feel a nap coming on after a fine weekend of sport.
