Australian Stock Market Report – Midday September 1, 2014

Stock market indices — A pedestrian holding her mobile phone looks at an electronic board showing graphs of various countries' stock market indices outside a brokerage in Tokyo July 22, 2014. Reuters

ASX 200 edges towards 5650

 The local share market has started the week on a positive footing, gravitating towards the 5650 area for the ASX 200. Sentiment was helped by US share markets which ended modestly higher on Friday. Investors remained wary as they monitored both the situation in Ukraine and mixed economic data in addition to a wariness about taking on new positions ahead of a holiday weekend. Domestic sellers remain wary of the underlying strength of US stocks with the S&P 500 index closing at record highs; while the Nasdaq lifted by to 14-year highs.

 There is a long list of stocks going ex-dividend on Monday including; BC Iron (BCI) 15 cents, Fortescue Metals Group (FMG) 10 cents, Lead Lease (LLC) 49 cents, Toll Holdings (TOL) 15 cents and Tatts Group (TTS) 5.5 cents amongst others. Consumer Staples were the only group to spend the morning underwater on Monday reflecting a decline of more than 1 percent for Woolies (WOW). Investors remained underwhelmed by the profit result posted at the end of last week. By contrast Wesfarmers (WES) shares were ahead by 0.5 per cent on the back of a reasonably well seen results announced last week.

 The feature of the morning in economic terms was the release of Chinese manufacturing data. After adjusting for seasonal factors, the HSBC Purchasing Managers' Index (PMI), a composite indicator designed to provide a single-figure snapshot of operating conditions in the Chinese manufacturing economy, posted at 50.2 in August, down from July's 18-month high of 51.7. This signalled only a fractional pace of improvement that was the weakest in three months. In summary HSBC said that the "Chinese manufacturing sector still expanded in August, but at a slower pace compared to previous months. We think the economy still faces considerable downside risks to growth in the second half of the year, which warrant further policy easing to ensure a steady growth recovery". There was little in the report to encourage the resource sector. Leading names in mining moved higher in response to the ground lost in recent weeks rather than any conclusions drawn from the HSBC survey. Fortescue Metals Group (FMG) was the exception amongst the bulk miners with a loss of almost 1.5 per cent on account of going ex-dividend.

 In the discretionary space Harvey Norman shares stood out as the stock continues to squeeze higher rising by close to 3 percent. While HVN continues to benefit from a better than expected result last week, another factor propelling the shares higher has been the fact that the share are a particular favourite amongst the shorting fraternity.

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