MARKET COMMENT: S&P/ASX 200 Up 0.6% Before China Flash PMI Data

0000 GMT [Dow Jones] Australia's S&P/ASX 200 is up 0.6% at 5046.9 before the 0145 GMT release of HSBC's flash China manufacturing PMI data. High-yield and defensive stocks are outperforming, with major banks, Woolworths (WOW.AU), Wesfarmers (WES.AU) and Westfield (WDC.AU) up 0.7%-1.6%. Resources are lagging after commodity prices weakened. Rio Tinto (RIO.AU) is down 0.5% and Woodside (WPL.AU) is down 1.9%. Relatively broad-based gains have followed Friday's release of stronger-than-expected German business confidence data and U.S. earnings reports which pushed the S&P 500 up 0.9%. However, the S&P/ASX 200 had already anticipated Wall Street's recovery from a steep decline which followed FOMC minutes indicating increasing concern among Fed members about the risks of its quantitative easing program. Traders are now looking to see if the index can break Friday's peak at 5055.3. "The rally in the Australian market since last November has been remarkable for its orderly progression and low volatility," says Ric Spooner, chief market analyst at CMC Markets. "However, investors are starting the new week conscious of the increasing risks that this behaviour pattern may change. Last Thursday's high turnover and 2% decline provides an insight into the market's potential for a sharp decline. There is now more potential for significant market moves in either direction." ([e-mail])

 
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