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.