A bullish heavy volume surge on the Australian sharemarket was snuffed out today after the Chinese flash manufacturing PMI index tumbled by the most on record.
Following a 0.3 per cent gain on Wall Street last night, the S&P/ASX 200 index climbed 0.7 per cent in early traded but it dropped back to close 4.3 points, or 0.08 per cent, up at 5638.9 as the Chinese data became the first reflection of the plunge in lending in July.
Overnight US stocks stumbled after the US Federal Reserve board meeting minutes showed a marked shift to a “hawkish”, higher interest rate stance.
The HSBC China PMI index fell 1.4 points to a three month low of 50.3 points as disinflationary pressures returned.
“Today’s data suggest that the economic recovery is still continuing but its momentum has slowed again,” HSBC economist Hongbin Qu said.
“Therefore, industrial demand and investment activity growth will likely stay on a relatively subdued path.”
The Shanghai composite index was off one per cent at the close of the ASX.
In Tokyo the Nikkei index was up 0.8 per cent after a surge in the US dollar against major currencies knocked the yen and supported Japanese exporters, while Japan’s PMI index climbed 0.9 points to 52.4.
The Australian dollar dropped US0.3¢ to US92.50¢ but government 10-year yields jumped 7.5 points to 3.502 per cent following a 3 point rise in global benchmark US 10-years to 2.43 per cent on the Fed minutes.
“While discussion around the table at the (Fed) FOMC, including advice from the Fed staff on the and among the protagonists on inflation and employment outlook, the final opinion of the Fed Chair and her voting FOMC members is another,” National Australia Bank economist David de Garis said.
“The “significant underutilisation of labour resources” view of the labour market carries the day as far as monetary policy is concerned. The market now waits for Dr Yellen’s address to the Kansas City Fed Jackson Hole conference on Friday.”
Spot iron ore fell 0.8 per cent to $US92.30 a tonne while Dalian iron ore futures were off 0.5 per cent today.
Copper leapt 2 per cent overnight on rumours of Chinese restocking but the price fell 0.5 per cent to $US6975 a tonne today on the weak manufacturing data.
Gold dropped $US8 to $US1286 an ounce.
The market reached a new six-year high of 5,679.5 but sell-offs began when the latest reading on manufacturing activity in China fell below expectations.
OptionsXpress analyst Ben Le Brun said the materials sector was the hardest hit.
“We had the winds knocked out of our sails.”
“Really that (the Chinese data) was the only thing that was going to stop it, and stop it did unfortunately, with the pain being felt in the resource sector.”
BHP Billiton was down 10 cents, or 0.26 per cent to $38.03 after reaching a high of $38.53 in earlier trading.
Rio Tinto was down 38 cents, to $65.60 and Fortescue Metals was seven cents to $4.48.
It was a mixed picture amongst the big banks. Commonwealth Bank was down three cents to $80.27, NAB was up 12 cents to $34.36, Westpac was up six cents to $34.94 and ANZ was down six cents to $33.21.
In other company news, Origin Energy’s annual profit grew 40 per cent, and its shares were up 59 cents to $14.78.
AMP’s half year underlying profit rose 16 per cent and the financial services company delivered a higher dividend, sending its shares 23 cents higher to $5.75.
Super Retail Group was another stock to rise, after the owner of Super Cheap Auto and Rebel forecast sales growth in the second half of the current financial year. Its shares had added 46 cents to $9.18.
Breville Group was the stand out flunk of the session, down $1.62, or 18.58 per cent to $7.10 after chief executive Jack Lord stepped down.
Gambling firm Tatts was also down, dropping 21 cents, or 5.8 per cent, to $3.41 after its profit and revenue dropped.
Mr Le Brun said the market would be watching the start US Federal Reserve chair Janet Yellen’s address at the Jackson Hole seminar which begins on Friday.
The broader All Ordinaries index was up 4.8 points, or 0.09 per cent, at 5634 points.
The September share price index futures contract was two points lower at 5604 points, with 30,936 contracts traded.
Preliminary National turnover was $2.3 billion securities worth $6.6 billion.