Australian shares slumped at the opening today as investors digested the implications of Russian military moves in Ukraine. While an all-out conflagration seems unlikely, prudent investors took advantage of elevated share prices to reduce overall exposures. However, stronger company profits and a lift in employment advertising pushed bargain hunters into the market, and the main index regained around two thirds of the morning’s losses. A number of themes under pinned the bounce back. According to numbers released today, manufacturing in China contracted in line with expectations, but the expansion in services industries was larger than forecast. Mining companies were hard hit by weakness in manufacturing. Gold and energy shares featured, as both underlying commodities rose on safe haven buying and fears of potential disruption to Russian gas supplies to Europe. The consumer staples sector was dragged lower by Woolworths, as investors continued to “sell the fact” after a strong share price rise into Friday’s pleasing profit report. The reporting season is coming to a close, and the overall market scorecard is in good shape, and prospects for an overall lift in earnings of 14% for 2014 are firming. The conflict between the healthy local business environment and potentially de-stabilising international developments could see share prices see-saw over the next few sessions.

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