Soft US manufacturing data raises activity concerns

Cyclical stocks and those leveraged to manufacturing activity came under pressure during the trading session following the release of soft manufacturing numbers which raised concerns about the strength of the underlying US economy.

The Dow was the worst performing index closing down 0.30 per cent. The S&P 500 finished 0.11 per cent higher, while the Nasdaq was the best performer closing up 0.56 per cent.

The US manufacturing sector is showing signs of a slowdown in activity with the ISM manufacturing index measuring 48.7 in May, below expectations. A reading below 50 is seen as an indication of a contraction in manufacturing activity. The purchasing managers group’s measure of new orders slid 3.7 points, the biggest drop since June 2022, to 45.4 in May. The bookings index now stands at the lowest level in a year, suggesting demand across the economy is weakening.

Investors will now turn their attention to payroll data expected to be released on Wednesday and the May jobs report due out on Friday.

In company news, Nvidia rallied 5 per cent after it announced a suite of new artificial intelligence chips as it attempts to stay ahead of competitors. In further commentary the AI giant said it will upgrade its AI chip architecture on an annual basis in its efforts to remain ahead of the curve.

In commodities news, iron ore fell more than 4 per cent on reports of Chinese stock builds and sluggish downstream consumption.

Oil dropped below $US79 a barrel after OPEC signalled its members will lift output. Sentiment was also impacted by the weaker than expected US factory data released earlier in the day.

Turning to US sectors, following the news surrounding OPEC, Energy was the worst performer, closing 2.6 per cent lower. Tech was the best performer overnight.

China's ongoing housing crisis persists into its third year with new-home sales dropping by 34 per cent in May compared to the previous year, reflecting sustained weakness in the real estate sector. Despite signs of an uneven economic recovery, there remains criticism of insufficient government intervention to address the housing market challenges, as noted by many economists.

Futures

The SPI futures are pointing to a 0.2 per cent fall.

Currency

One Australian dollar at 7.30am was buying 66.88 US cents.

Commodities

Gold has added 1.00 per cent. Silver has gained 1.13 per cent. Copper has risen 1.42 per cent. Oil has dropped 3.60 per cent.

Figures around the globe

European markets closed mixed. London’s FTSE fell 0.15 per cent, Frankfurt rose 0.60 per cent, and Paris closed 0.06 per cent higher.

Turning to Asian markets, Tokyo’s Nikkei added 1.13 per cent, Hong Kong’s Hang Seng gained 1.79 per cent while China’s Shanghai Composite closed 0.27 per cent lower.

Yesterday, the Australian share market closed 0.77 per cent higher at 7,761.03.

Ex-dividends
Probiotec (ASX:PBP) is paying 3.75 cents fully franked

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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