Our market will start the week with a small decline today, but the most immediate impact will be the weaker than expected survey of manufacturing activity in China last month.
That was a touch weaker than expected and with the second monthly survey out today and expected to again be weak, we could have a rise in the level of concern about the health of the world’s second biggest economy.
The Chinese government’s official Purchasing Managers’ Index (which reports on the performance of larger companies) was at 49.8 last month, unchanged from September and despite forecasts for a small rebound to a reading of 50. A reading below 50 points suggests an contraction in manufacturing.
New export orders shrank for a 13th straight month, though the sub-index for new orders – a proxy for both domestic and foreign demand – edged up marginally to 50.3, compared with September’s 50.2, the survey reported.
Investors will await the appearance of the Caixin/Markit survey (which looks at smaller companies). It was deeply in contraction last month with a reading of 47.2. That will be out later today.
So it will be a mixed start across Asia – our market should be down around 25 points at the opening, if the overnight close on Saturday morning in the ASX 200 futures market is any guide.
But with more economists tipping a rate cut at tomorrow’s Reserve Bank board meeting, trading locally will be hesitant.
Sharemarkets were mixed the last week with US shares up 0.2% and Japanese shares up 1.4%, but eurozone shares fell 0.2%, Chinese shares lost 0.9% and Australian shares fell a nasty 2.1%.
Eurozone shares rose 0.2% on Friday night, but the US S&P 500 lost 0.5%.
It was a strong October for sharemarkets though, with US, eurozone and Japanese shares up by between 8-10%, Chinese shares up 10.8% and Australian shares up 4.3% (which was trimmed by a third by last week’s slide here).
After the sharp share market falls in the September quarter, October lived up to its reputation as a “bear killer”.
MSCI’s all-country world index of stock performance in 46 countries eased 0.1% on Friday, but posted its best monthly gain since October 2011, the same as the three major US indices. All four indices posted gains of 7.7% or more in October.
The S&P 500 was up 8.3% (that was after falling 8.5% in August and September), the Dow gained 8.5%, while the Nasdaq jumped 9.4%.
The Dow Jones industrial average fell 92.26 points, or 0.52%, to 17,663.54, the S&P 500 lost 10.05 points, or 0.48%, to 2,079.36 and the Nasdaq Composite dropped 20.53 points, or 0.4%, to 5,053.75.
For the week, the Dow inched up 0.1%, the S&P increased 0.2%, and the Nasdaq rose 0.4% . The S&P posted its fifth straight week of gains, its longest winning run this year so far.
In Asia the Tokyo market was up a very solid 9.7% in October, the best since 2013, while in Europe the Stoxx 600 index rose 8% last month after losing less than 0.1% on Friday and half a per cent over last week.
In Australia, the ASX200 index lost 0.5% on Friday, while the All Ordinaries index lost 0.4% and 1.8% over the week.
