Australian Stock Market Report – Midday 9/23/13

Commsec Mid Session Report.

The obstacle of Fed tapering appears to be out of the way for the time being and at face value it seems as though the markets finally have some clear air. Although the price action of the markets most recently suggests that in the absence of any Fed temperance in relation to Q.E, investors are erring on the side of caution and calculating that tapering is a matter of when rather that if. There has been a consolidation of this sentiment after the president of the St Louis fed suggested October could bring with it the initial tapering of policy from the Fed. Not only has the US Fed missed an opportunity to create some clarity around its Q.E intentions, errant and vocal speculation has set the markets back several months in terms of the dialogue around US asset purchases.

Amidst this atmosphere sellers have gained control of stocks in the early part of Monday's session. The momentum of the selling has abated somewhat in the wake of better than expected manufacturing data from China. Figures showed that activity in china´s manufacturing sector expanded slightly in September to hit a six-month high. The HSBC flash China manufacturing purchasing managers´ index for September came in at 51.2, after a reading of 50.1 in August. In isolation the figures don't move the needle of sentiment in relation to China, although in addition to recent figures from the world's second largest economy, the indications are that Chinese growth is turning a corner.

At its worst levels of the morning the index was down in the range of 0.8%. It appeared as though investors were reluctant to take the market any further into the red in the absence of the Chinese data. The impact on the market of the better Chinese figures was best seen through the bulk miners who saw their losses halved following the Chinese data. Before the release BHP and RIO were seing losses in the range of 1.5%.

Economic news for the remainder of the week is unlikely to impact prices significantly. Rather markets have returned to a dynamic where in the absence of any clarity from the Fed, the markets are left with extracting insights from random Fed officials. Volatility seems the only certainty; one step forward, two back.

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