Slight rise defies dismal economic view

The benchmark S&P/ASX 200 Index rose 7.6 points, or 0.2 per cent, to 4323.7.

Poor data from China, a surprise drop in Australian retail sales and ex-dividend trading in large stocks, such as BHP, were all an early drag on the market.

"We did have competing forces we had quite a strong lead from the US market from Friday night but offsetting that was the negative PMI from China and the pretty disappointing retail sales result locally," said CMC Markets senior trader Tim Waterer.

China's official purchasing managers index (PMI) fell to a nine-month low of 49.2 index points in August, from 50.1 the previous month, a drop that was mirrored by a separate PMI index by HSBC.

Australian Bureau of Statistics data showed retail spending fell 0.8 per cent in July, coming in below expectations of a 0.2 per cent rise.

Mr Waterer said a glass half-full approach from traders helped push the market back up into gains.

"[Traders are] thinking 'yes while the economic numbers were weak, it may prompt some central bank activity, both here and potentially in China'," he said.

The Reserve Bank board meets today to decide on the cash rate, but economists almost unanimously predict the rate will stay on hold for a third straight month.

But the weak local data has raised expectations of a rate cut later this year, which contributed to the dollar plumbing a six-week low of US102.4?.

Mr Waterer said the market was also heavily influenced by miners which, despite BHP trading ex-dividend, regained much of their earlier losses. BHP finished down 38?, or 1.2 per cent, at $31.41, while Rio Tinto added 61?, or 1.2 per cent, to $49.85, and Fortescue rose 2?, or 0.6 per cent, to $3.56.

There was little activity among the banks. ANZ added 2?, or 0.1 per cent, to $24.84, Westpac gained 8?, or 0.3 per cent, to $24.85, NAB rose 9?, or 0.4 per cent, to $25.30 and CBA led the gains, up 25?, or 0.45 per cent, at $54.99.

"Once we found our feet after being down, it was quite a muted trading session in the afternoon. Some of which is down to the fact that the US is on holiday this evening," Mr Waterer said.

Consumer discretionary stocks took a blow after the weak retail data, which showed that department store sales slumped 10.2 per cent last month.

Myer fell 7.5?, or 3.8 per cent, to $1.92, David Jones slipped 3?, or 1.2 per cent, to $2.39 and JB Hi-Fi lost 17?, or 1.9 per cent, to $8.96.

Mr Waterer said several events could prompt fireworks on the market later in the week. Highlights are Thursday night's meeting of the European Central Bank on interest rates, and employment data from the US on Friday.