Healthier Chinese figures give stocks a lift

Stronger than expected manufacturing data from China spurred a rally on the Australian sharemarket on Monday.

The benchmark S&P/ASX 200 Index shot up 53.34 points, or just over 1 per cent, to 5188.3, while the broader All Ordinaries firmed 57.7 points to 5178.

Tony Paterno, senior investment adviser at Ord Minnett, attributed the gains to the Chinese data, which showed factory activity grew last month for the first time in four months, as domestic demand rebounded.

This was according to the final HSBC/Markit Purchasing Managers' Index (PMI), which climbed to 50.1 last month, up sharply from July's 47.7, a day after China's official PMI rose to a 16-month high.

The data supported signs that the Chinese economy might not be slowing as much as feared.

"I think [the PMI] is the highest it's been in over a year now, which is a big positive," Mr Paterno said. "It has lifted energy and resource stocks. The financials have been dragged up as well. They're up about 1 per cent overall. Everything seems to up 1 per cent."

It also fuelled a rally by the Australian dollar, which was up 0.9 per cent at US89.82¢ at market close.

All sectors except utilities ended in positive territory. Resource shares, except for BHP Billiton, had a good day, with the energy and materials sub-indices rising 1.9 per cent and 0.3 per cent respectively.

BHP, which traded ex-dividend, closed down 0.4 per cent at $35.62. Rival Rio Tinto advanced 1.6 per cent to $59.22. "Had BHP not gone ex-dividend, it probably would have been up about 80¢," Mr Paterno said.

Among the energy stocks, Origin outstripped the broader market, rising 4.5 per cent to $13.85, after it said on Friday it would cut its borrowing costs by as much as 50 basis points as it markets Australia's biggest syndicated loan this year.

The big banks also were up, with the financial sector rising 1 per cent. Commonwealth Bank was the biggest mover, firming 1.2 per cent to $73.68.

Bell Potter's Charlie Aitken said that despite the fact many bank analysts saw CBA as overvalued, its strength made sense. "In the eyes of its dominant mum-and-dad investors it's cheap," he said. "You can't part them from the stock as long as the dividend is growing."

Billabong joined the broader market rally, surging 14.1 per cent to 48.5¢.