Australia Market ends higher

Headline indices of the Australian market closed edge above the boundary line on last trading session of the week and month, 31 May 2019, after hovering in negative terrain most of the time. Investors risk sentiments remain fragile after release of weaker than expected China's manufacturing data and as US President Donald Trump ramped up trade tensions globally by suddenly slapping tariffs on all goods from Mexico. Meanwhile, ongoing trade fight between the U.S. and China also continues to weigh on markets. ASX sectors were mixed, with telecommunication, materials, industrials, and healthcare issues being notable gainers, while information technology, energy, and financials were notable losers. At closing bell, the benchmark S&P/ASX200 index advanced 4.77 points, or 0.07%, at 6,396.90 points, while the broader All Ordinaries added 2.62 points, or 0.04%, at 6,491.80.

The risk sentiments were subdued as the Trump administration's move to escalate its trade war with other countries further shook already fragile risk sentiment in global financial markets. Investors feared U.S. President Donald Trump's shock move to slap tariffs on Mexico risked tipping the United States, and maybe the whole world, into recession.Washington will impose a 5per cent tariff from June 10, which would then rise steadily to 25per cent until illegal immigration across the southern border was stopped.

 

The outlook darkened further when a key measure of Chinese manufacturing activity disappointed for May, questioning the effectiveness of Beijing's stimulus steps. China's official manufacturing PMI for May fell into contraction territory. April's reading was 50.1, which was only marginally above the threshold for expansion, but May's reading was 49.4, which suggests that manufacturing activity in May actually shrank. The most eye-catching sub-index is the "new orders index", which measures domestic manufacturing activity. This came down drastically from 51.4 in April to 49.8 in May. PMI readings above 50 indicate expansion, while those below that signal contraction. The official PMI survey typically polls a large proportion of big businesses and state-owned enterprises. A separate survey, the Caixin indicator, features a bigger mix of small- and medium-sized firms. The Caixin manufacturing PMI is due on June 3.

The ongoing trade fight between the U.S. and China also continues to weigh on markets, following a recent escalation in rhetoric. Chinese Vice Foreign Minister Zhang Hanhui said Thursday that provoking trade disputes amounted to naked economic terrorism. Also, China has reportedly halted soy purchases from the U.S.

Investors clearly feared that opening a new front in the trade wars would threaten global and U.S. growth, and pressure central banks everywhere to consider new stimulus. On Thursday, Federal Reserve Board of Governors Vice Chair Richard Clarida had said the central bank would act if inflation stays too low or global and financial risks endanger the economic outlook.

Shares of energy companies were weak after crude oil prices tumbled almost 4% overnight. Santos, Woodside Petroleum, and Oil Search were down in a range of 2% to 3%.

Shares of banks and financials were lower. The big four banks - ANZ Banking, National Australia Bank, Commonwealth Bank and Westpac - were down in a range of 0.3 percent to 1.3 percent.

CURRENCY NEWS: The Australian dollar was down against the U.S. dollar on Thursday. The Australian dollar was quoted at $0.6906, compared to $0.6934 on Thursday.

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