Australian Stock Market Report – Afternoon 4-23-13

Afternoon Market Report
17:00 AEST

It was an almost counter intuitive day for the local share market on Tuesday which managed a solid improvement of 1% not withstanding a weaker than expected reading on Chinese manufacturing.
· The HSBC "flash" Purchasing Managers Index for China eased from 51.6 to 50.5 in April. A reading above 50 suggests the manufacturing sector is expanding. The sub-index measuring export orders saw a substantial fall from 50.5 to 48.6 in April suggesting weakening demand conditions external to China. The sub-index measuring employment also dipped in April, while input and outprices recorded modest falls. Whilst it is valuable to remember that the Chinese economy is still expanding, it's doing so at a more modest pace compared to the expectations of the market community. The conclusion from the latest round of Chinese data indicates the pace of expansion has cooled in the last few months. After a strong finish to 2012, Chinese activity indicators have eased in recent times. The markets will now wrestle with the notion of how the June quarter will shape up after what appears to be a weaker start.

The resource sector was the only casualty of the weaker Chinese data. The group was led lower with a 2% decline for RIO. Elsewhere gold miner Newcrest fell after it production report. The market had been prewarned by Newcrest after a downgrade to production estimates in March. Regardless production was a little lighter and costs higher which saw the stock shed more than 3%. Newcrest is reviewing the future of its high-cost mines after a slump in gold prices marked by last week´s significant decline to two-year lows.

Ahead tonight; the focus will be flash Eurozone PMIs for April. This week's data will be closely watched for its potential to deliver more action from the ECB. The data has significant scope to impact European stocks and the currency markets potential to impact European markets and the EUR.

In the US Existing Home Sales for March will be released. The upswing in the housing market was a turning point for US markets. Any sense that ground is being lost could damage market sentiment.

[Kick off your trading day with our newsletter]