There’s nothing like a bit of good news from China to get the blood racing among punters on the ASX. Yesterday was no exception with the better than expected flash report on the heath of Chinese manufacturing a good example of how sentiment changes with a few tenths of a point behind a decimal place.
Unfortunately for local investors, our solid day yesterday was a one off – the bullish tone flowing form the news from China failed to last – even in Asia the Hong market fell and major markets in Europe ended in the red as well and Wall Street snapped its six day winning run and also finished the day lower.
Even the local market was running out of steam late in the session yesterday – the market’s 34 point gain was well under the day’s peak of close to 50 points.
So here today the market will start much softer, except for the Aussie dollar which reclaimed that 94 US cent mark after the news from China, plus rises in Chinese prices for iron ore, copper and rubber futures off the back of the better manufacturing report.
The HSBC China manufacturing purchasing managers’ index ‘flash’ report came in at 50.8 in June, up from 49.4 in May and well above market expectations of 49.7.
It is the first time in 2014 the figure’s come in above 50, which means the economy is in a state of modest expansion.
"The improvement was broad-based," according to HSBC’s chief China economist Qu Hongbin who said in a statement accompanying the release. "This improvement is consistent with data suggesting that the authorities’ mini-stimulus measures are filtering through to the real economy." The higher reading followed a series of recent government measures aimed at supporting China’s sluggish economy.
The flash report will be have to be confirmed next week by the final report from HSBC / Markit. A similar report from the Chinese government has been a touch stronger than HSBC’s survey for much of the year. HSBC’s survey covers medium and small businesses, the Government survey reaches bigger companies.
The Australian dollar had been trading around 93.80 US cents range but bounced higher by well over half a cent to climb well above 94 US cents after the figures were released.
The dollar peaked at 94.45 US cents, up from 94.06 cents on Friday in Australia and around 93.88 early Saturday our time.
The local market started hesitantly, but gathered pace, and then kicked higher when the better than expected in the HSBC / Markit survey of Chinese manufacturing was issued around midday, our time.
The market then rose higher to be up close to 50 points from the start, but then drifted lower in the afternoon as the astute trader took profits.
The ASX200 Index and the All Ordinaries Index each added 0.6% (or around 33 points) to 5453.3 points and 5432.7 points, respectively.
The better news from China and rise in iron ore futures in China boosted Australian iron ore companies.
Rio Tinto rose 2.6% $60, while BHP Billiton rose 1.4% to $36.45. Fortescue Metals Group, our third biggest iron ore producer, jumped 4% to $4.39.
Arrium jumped 6.7% to 87 cents in the biggest rise in the ASX 200 yesterday.
Telstra Corporation rose 0.6% to $5.20, while three of the big four banks rose.
The Commonwealth added half a per cent to end at $81.79, Westpac gained 0.6% to $34.37, and the NAB was also up 0.6% to end at $33.34.
ANZ was unchanged at $33.98.
