Australian Stock Market Report – Midday 5-2-13

MID-SESSION REPORT

(12.30pm AEST)

A worse than expected reading on the health of China's manufacturing sector coupled with sluggish US jobs growth are dragging Aussie equities lower at lunch.

The All Ordinaries Index (XAO) is down 0.9 per cent, the second consecutive day of losses for local shares. The monthly measure of China's manufacturing sector by HSBC came in a touch worse than forecast, which has done little to help local markets. Australia sells significantly more to China than any other country, which is why markets tend to react to Chinese economic news.

At the risk of sounding like a broken record, the energy and mining sectors, which make up around 20 per cent of the local market, are once again holding equities back. Gold producer, Newcrest Mining (NCM) is down 2.3 per cent, while iron ore miner Fortescue Metals (FMG) is down 2.6 per cent. April 22 is the last time FMG had an up day.

Telstra (TLS) is up 0.2 per cent and is trading at fresh eight-year highs. In contrast to the miners, April 19 was the last time Australia's sixth biggest company lost ground on the local market.

Yesterday, China's official manufacturing PMI also disappointed after falling from 50.9 to 50.6. This signals modest expansion however the reading edged closer to the 50.0 mark; a level which separates contraction from expansion. This highlights the fact China's economy is still far from shooting the lights out.

Overnight, a report showed that 119,000 private-sector jobs were created in April; 26,000 fewer than anticipated and a seven-month low. Construction spending slumped by 1.7 per cent in March due to a fall in non-residential construction projects and the Federal Reserve made no surprise announcements in its two-day monthly meeting overnight.

At lunch, 809.7M shares have exchanged hands, worth $1.83bn. 237 stocks are higher, 527 are in the red and 278 are unchanged.

Over the past 24 hours, many of the world's biggest markets closed their doors for the May Day holiday. Markets in China, India, Hong Kong, Malaysia, the Philippines, Singapore, South Korea, Taiwan, France and Germany were all closed on Wednesday.

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