Two major events in Australia will likely overshadow today’s release of important China data. Yesterday’s exuberance may unwind in the early session today as investors and traders prepare for an RBA rate decision and the Melbourne Cup. Negative leads from European and US share markets, and declining oil prices, are likely to dominate morning trading.

Both the official and private reads on China manufacturing are forecast to show modest expansion. However, unexpected strength in US PMIs and a depreciating Yuan may set the scene for a surprise. Further rises in iron ore prices depend on an at least par reading. Industrial metals are the likely barometer for market reception of the data.

No change is the consensus for Australian interest rates, with a number of notable outliers looking for a cut. The RBA has room to move if it wishes, as inflation continues to underperform despite the most recent rise. However, statements from the past Governor, and new Governor Lowe, suggest the RBA is reluctant to cut, especially given the potential for a US rate rise in December. Any surprise move would likely provide a shot of adrenalin for local investors.

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