Australian Stock Market Report –Afternoon 1/23/14

EVENING REPORT
(5.30pm AEDT)

A disappointing monthly reading on the health of China's manufacturing sector pushed the Australian market and dollar lower this afternoon. The All Ordinaries Index (XAO) slipped by 1.1 per cent, the most significant daily loss in a week.

At 12.45pm (AEDT), the HSBC Flash Manufacturing PMI fell from 50.5 to 49.6; indicating modest contraction within the sector. The fallout was clear with the All Ordinaries Index falling from 5330.0 to a low of 5266.5 following the report. It was a similar story for the Australian dollar, with our currency falling from US88.45c to a low of US87.8c this afternoon. The Chinese government has made it no secret that it's focus isn't to boost growth, but rather to 'rebalance' the Chinese economy while stepping away from reliance on credit. A shift from investment fuelled growth to higher domestic consumption is likely.

The miners were hit hardest, slumping by 1.28 per cent as a sector. BHP Billiton (BHP) was the biggest drag, falling by 1.57 per cent. Rio Tinto (RIO) dropped by 0.95 per cent, iron ore producer Fortescue (FMG) lost 2.06 per cent and gold miner gave back all its gains to finish 2.2 per cent lower.

Tonight in Europe, the highlight will be a flash manufacturing reading at 8pm (AEDT). A slight improvement is likely, with PMI expected to rise from 52.7 to 53.2. A reading above 50.0 indicates industry expansion. Spain will release an update on its unemployment rate at 7pm (AEDT), which is expected to remain steady at a ridiculously high 26 per cent. The World Economic Forum will continue in Davos, Switzerland tonight.

In the U.S. tonight, a weekly read on jobless claims will be issued. The result may be affected by the cold weather snap in the U.S. Given the weaker than anticipated December jobs report, this particular piece of data will receive more attention than usual. A raft of housing numbers will also be released; including existing home sales and a house price index, which should show that U.S. home prices are supporting a lift in wealth levels. A monthly read on the current state of America's manufacturing industry will also be issued, together with an update on crude oil inventories (which could impact U.S. oil prices). Honeywell International, Tower Financial and Xerox will issue profit results overnight.

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