Potential buyers waiting for good news or improved value

The share market looks likely to drift lower this morning with little obvious reason to bring buyers back to key mining and bank stocks in any strength. 

The 49.8 read in China’s official manufacturing PMI leaves intact the consensus outlook for soft conditions in the heavy manufacturing sector.  Given the recent downward drift in iron ore and copper prices, the weekend’s PMI figure is probably more a negative than a positive for mining stocks today.

Westpac’s profit result and outlook statement held few surprises as it released summary data two weeks ago with its capital raising announcement.  The potential for slower growth in housing lending will be a negative for banks. However, the improved business lending evidenced by last week’s data is a welcome development that may help offset this to some degree. The chances are that difficult trading conditions which were a drag on institutional banking profits in the last half will be a temporary phenomenon providing potential to recover in this area during the current year.

This morning’s release of Building Approvals data for September will be an interesting number leading into tomorrow’s RBA meeting. Momentum has begun to stall in recent months. This suggests that dwelling construction’s contribution to overall GDP growth in Australia is going to decline. If this trend is confirmed, the relative importance of nascent recoveries in other areas of the economy such as manufacturing and tourism will only increase.