Data Drives Fears
Nervous investors are selling down shares as markets anticipate the release of globally sensitive manufacturing data from China. Moderate losses in overnight trading in the US are turning to substantial selling in after-hours trading as futures markets treble the drop during the US session. Naturally, this is weighing on the opening in Asia Pacific markets today.
Much of last week’s selling related to fears of a weakening Chinese economy. Today brings both the official and private read on manufacturing activity. Although services businesses in China are expected to grow faster than manufacturing, it remains a focus for markets. The official data showed a modest contraction, with an index reading just below the breakeven point at 50, and in line with consensus forecasts. If this is confirmed by the private read later in the session it will be hard for the bears to hold ground.
Local data is just as important to Australian investors today. Modest lifts in consumer confidence and manufacturing reported this morning helped shares climb off their lows. Balance of payments data and building approvals will hit the market just before mid-session, and these volatile series are often influential. Later in the session the RBA will deliver its interest rate decision for September. While ‘no change’ is the almost universal forecast, investors will look for the RBA’s take on recent market moves and any reference to external partners – read China and the US.
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.
Frequently Asked Questions about this Article…
Investors are selling shares because they are nervous about the anticipated release of globally sensitive manufacturing data from China. Concerns about a weakening Chinese economy are driving these decisions, as manufacturing activity is a key focus for markets.
The US market impacts Asia Pacific markets because substantial selling in after-hours trading in the US can weigh on the opening of Asia Pacific markets. Overnight trading losses in the US can lead to increased selling pressure in Asia.
The manufacturing index reading in China is significant because it indicates the health of the manufacturing sector. A reading just below the breakeven point at 50 suggests a modest contraction, which can influence market sentiment and investor decisions.
Local Australian data, such as consumer confidence and manufacturing reports, can affect investor sentiment by providing insights into the domestic economy. Positive data can help shares recover from lows, while negative data might increase investor caution.
The RBA's interest rate decision is crucial because it influences borrowing costs and economic activity. While a 'no change' decision is widely expected, investors pay close attention to the RBA's commentary on recent market moves and its views on external partners like China and the US.
The balance of payments data is important for investors because it provides insights into the country's economic transactions with the rest of the world. This data can be volatile and influential, impacting investor decisions and market movements.
Investors should watch for trends in building approvals data as it reflects the construction sector's health and future economic activity. Significant changes in this data can influence market sentiment and investment strategies.
Investors can contact Michael McCarthy at CMC Markets for further commentary by calling 02 8221 2135. He can provide additional insights into market movements and investment strategies.
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