Australia Market modestly higher

Headline indices of the Australian financial market were slight higher after trimming early gains on Friday, 01 February 2019, after a private survey showed that China's manufacturing activity contracted more than expected in January. Around late afternoon, the benchmark S&P/ASX200 index added 3.95 points, or 0.07%, to 5,868.60 points, while the broader All Ordinaries index rose 2.52 points, or 0.04%, to 5,939.80 points.

Local share market commenced trading with firm footing today, following the mostly positive cues overnight from Wall Street amid upbeat corporate earnings results and on optimism about U.S.-China trade talks. However, most of the earlier gains steamed out after a private survey showed that China's manufacturing activity contracted more than expected in January, reinforcing fears of a slowdown in the world's second-largest economy. Investors are also cautious as they look ahead to the U.S. jobs data for January due later in the day.

China's factory activity shrank by the most in almost three years in January as new orders slumped further and output fell, a private survey showed, reinforcing fears a slowdown in the world's second-largest economy is deepening. The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) for January, released on Friday, fell a second straight month, reaching 48.3 - its worst reading since February 2016 - from 49.7 in December. Taken together, the private and official factory PMIs suggest China's economy continued to lose momentum at the start of the year, which was widely expected, with small and medium-sized firms under the most stress despite a slew of government support measures for the private sector. New orders - an indicator of future activity - also contracted for the second straight month, to 47.3, the lowest reading since September 2015, with companies reporting weak market demand despite the most aggressive price discounting in three years.

Shares of materials and resources were up, as Copper prices hit a seven-week high overnight and iron ore prices also continued to march higher. Mining giant BHP was up 1.12% while Rio Tinto increased 0.6% and Fortescue Metals rose 1.4%. A steady gold price helped Newcrest Mining advance 1.51% while Northern Star was up 0.97%.

Consumer facing stocks are also seeing gains with Treasury Wine Estates (TWE) one of the standouts. The owner of wine brands such as Penfolds and Wolf Blass is lifting 1.9% while supermarket giant Woolworths (WOW) is 0.4% higher.

Shares of major financials were mixed on caution ahead of the release of the financial services royal commission on Monday. Shares of ANZ, NAB and Westpac were lower while Commonwealth edged into positive territory.

Energy stocks were the main drag after crude oil prices slipped overnight, with Santos (STO) and Origin Energy (ORG) leading the losses.

In company news, Healthscope (HSO) rose 3.8% after the private hospital operator accepted a $4.5 billion takeover offer by Canadian private equity firm Brookfield Partners. The deal is still subject to shareholder and court approval. Wisetech Global (WTC) has eased 0.4% after the acquisition of Norwegian customs and logistics solutions provider, Systema AS, for an upfront cost of $3 million.

Reliance Worldwide (RWC) was weaker by 3.1% after reaffirming FY19 earnings (EBITDA) guidance but could be negatively impacted by 1.5-3% depending on weather conditions in the US.

On the economic front, the latest survey from the Australian Industry Group showed that the manufacturing sector in Australia moved to expansion in January, with a Performance of Manufacturing Index score of 52.5. That's up from the stagnation point of 50.0 in December; a reading above indicates expansion and below means contraction. The Australian Bureau of Statistics said that final demand producer prices were up 0.5% on quarter in the fourth quarter of 2018, down from 0.8% in the three months prior. On a yearly basis, final demand producer prices advanced 2%, slowing from 2.1% in the third quarter.

CURRENCY: Australian Dollar inclined against greenback and against a basket of other peers on Friday. The Aussie dollar was quoted at $0.7270, down from a high of $0.7269 on Thursday.

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