The Australian sharemarket finished a choppy session firmly in the black today, but off the day's high, despite the bullish global growth outlook being dealt a blow by a sharp pull back in Chinese manufacturing data.
The S&P/ASX 200 index climbed 0.9 per cent mid-session, halved its gains as the major banks joined the sell-off, before rallying again to close 37.6 points, or 0.75 per cent, up at 5055.8 points, as investors bought into the dip and the small ordinaries index matched the gain in large cap stocks.
The HSBC February flash PMI index fell 1.9 points to 50.4 points, barely in the expansion zone.
Markets have been factoring in acceleration in Chinese and global growth at least until mid-year, but the HSBC survey showed falling export orders and new order backlogs, confirming the weak environment for exporters reflected in data from Germany and Singapore last week.
The Australian dollar fell 0.3Â¢ to $US1.0270 and government 10-year bond yields dropped 3.3 points to 3.503 per cent as the Chinese data.
Market attention is firmly focused on Thursday's capital expenditure data which will give in indication of how long mining investment spending will support the domestic economy.
Goldman Sachs economist Tim Toohey said although the rate of change of investment was holding up, key LNG operations highlighted that several major projects with a combined capex value of about $90 billion had entered the second half of their construction life and "by far their most import-intensive phase".
"Overall, this suggests a greater share of each dollar of future capex will leak offshore and not bolster domestic demand (relative to our 2012 analysis)." He said. "In view of this, and the fundamental weight of mining capex fade already in the pipeline, the need for a meaningful and (partly) offsetting lift in non-mining prospects is becoming acute."
The Shanghai composite index was up 0.3 per cent at the close of the ASX
In Tokyo the Nikkei index climbed another 2 per cent on reports the leading contender for Bank of Japan governor was the "ultra dovish" Asian Development Bank chief Haruhiko Kuroda, a man expected to willingly undertake the new government's stimulus plans.
Gold was little changed at $US1583 after US Commodity Futures Trading Commission data showed hedge funds slashed bullish gold bets by the most since 2007.
Copper rose for the first time in seven days, climbing 0.8 per cent to $US7860 a tonne.
The euro was languishing at six-week lows as traders awaited the outcome of the Italian election that could result in a hung parliament leaving disgraced former Prime Minister Silvio Berlusconi, who is against European Union imposed austerity measures, and populist anti-bank campaigner Beppe Grillo holding the balance of power.
The European Central Bank said 356 banks would repay 61.1 billion euro in long-term funding next week, less than half the expected number, with analysts blaming the Italian election uncertainty for bank's hanging onto the funding.
The British pound remained under pressure after the UK was downgraded one notch from AAA investment grade by ratings agency Moody's on Friday.More to come
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