Australia shares slip 1pc on weak data; eyes on RBA

SYDNEY: Australian shares fell 1 percent by mid-day Tuesday after data showed a slowdown in manufacturing growth in emerging and developed economies alike, and local building approvals took and unexpected fall in June.

A last minute US House vote to raise the borrowing limit and avert a debt default by the world's largest economy, was largely brushed aside as investors begun to focus on the health of the global economy.

"It seems as if the Australian share market has been lured into a false sense of security in the space of 24 hours. Yesterday's 73 point rally has been almost reversed," Ben Le Brun, market analyst at CMC Markets said.

He said soft manufacturing data overnight put paid to hopes of a sustained rally.

Global miners BHP Billiton dropped 1.9 percent, Rio Tinto fell 1.5 percent as metal prices fell. Copper posted its biggest one-day loss in two months on Monday.

But the market's direction is likely to be set by central bank's rate decision later on Tuesday. An announcement is due at 0430 GMT and most analysts expect the bank to hold rates at 4.75 percent , though there is a chance it will hike given core inflation has surprised on the upside for two quarters running.

A rate hike would hurt banks and retailers as already weak consumer sentiment would take a further hit.

Three of the top four banks were down almost 2 percent with top lender National Australia Bank leading the fall.

Retailers were down as well with Myer falling the most down 3 percent to A$2.3.

The benchmark S&P/ASX 200 index fell 47.6 points to 4,450, reversing part of Monday's 1.7 percent gain.

New Zealand's benchmark NZX 50 index slipped 10.3 points to 3,403.57.

STOCKS ON THE MOVE

Outdoor clothing retailer Kathmandu Holdings Ltd climbed 6.3 percent to A$1.86 after saying its expected its full year earnings to rise helped by new stores and favourable weather.

Copyright Reuters, 2011