October rally snaps ASX's sideways trend

Major miners also did well, with BHP up 3 per cent in October and Rio Tinto, 4.4 per cent. Fortescue Metals Group lagged badly, falling 9.7 per cent. The single biggest drag on the ASX over the month was LendLease, which plunged 9.5 per cent.

Some investors have been focused on the price measure of the ASX 200 which despite the recent rally, languishes well shy of its pre-GFC highs. But more significant was the sharemarket's performance once dividends are included, Maple-Brown Abbott managing director Garth Rossler said.

The ASX 200 accumulation index, which includes income, is at new highs, and its performance over recent years marks "the longest bull market we've had in about 50 years," Mr Rossler said.

That suggested the ASX has run a long way, Mr Rossler added.

"Markets are getting a bit tired," he said. "I think that valuations have become stretched; I don't think that's sustainable."

The ASX tends to perform strongly in October although last year saw weakness in the lead-up to the US election with the benchmark falling around 2 per cent as investors fretted about the qualities of both candidates in line to lead the world's largest economy.

Those hopes were given another leg up recently, with the House of Representatives Ways and Means panel set to end a secretive drafting process to cut America's tax rate by releasing the text of a bill on Thursday morning Australian time.

America is one part of a synchronised global growth rally that has developed in recent months but that Australian investors have only recently embraced with gusto to push the ASX to gains.

"Parts of the market are pretty expensive, for example industrials are trading on 19 times earnings," Mr Rossler said. "The spread between the premium-rated stocks and the least popular stocks is about as wide as it's been."

"We are cautious on the market, everyone is debating why it should go further."

The China demand story is still playing out for milk producer A2 Milk, up 30 per cent over the month, and Blackmores, up 35 per cent.

Stock Watch: Inghams

Shares in one of Australia's largest poultry producers slipped 3.8 per cent on Tuesday to $3.55, after the company confirmed its outlook remains unchanged since late August when it announced its full-year earnings results. The company said its strategy implementation remains on track and that its improved performance in New Zealand during the second half of financial year 2017 (FY17) has continued into FY18. However, Inghams also mentioned that feed prices have increased in recent months which could impact on earnings. Ingham's controlled around 40 per cent of the Australian chicken market at the time of its IPO in 2016 and also controls roughly 34 per cent of the New Zealand chicken market. Despite Tuesday's fall, the share price has managed to lift almost 15 per cent so far this year.

Chinese factory PMI

China's official factory gauge fell this month, with new orders and prices leading the decline, as officials increasingly prioritise a campaign to clamp down on polluting industries and rein in debt. The manufacturing purchasing managers index fell to 51.6 in October, compared with the 52 forecast in a Bloomberg survey of economists, and the five-year high of 52.4 in September. The non-manufacturing PMI stood at 54.3 compared with 55.4 in previous month, the National Bureau of Statistics said on Tuesday.

Credit growth

Credit to Australian businesses rose by just 0.1 per cent in September to be a modest 4.3 per cent higher over the past year. Business credit growth remains positive but is probably lagging the more upbeat business outlook surveys of the past six months," says Commonwealth Bank's Michael Workman. Housing credit expanded by 0.5 per cent in September keeping the annual rate at 6.6 per cent where it has been since May 2017. Investor housing credit growth is slowing and owner‑occupier credit growth is stable. The slowing in housing credit reflects the more onerous APRA lending requirements, as well as affordability issues as Melbourne and Sydney housing prices kept rising over the past few years," says Mr Workman.

Wheat

US wheat edged higher on Tuesday, rebounding from a two-month low touched in the previous session, after a report from the US Department of Agriculture showed that the condition of the crop was below market expectations. The most active wheat futures on the Chicago Board Of Trade were up 0.2 per cent at $US4.25 for 1/2 a bushel, having closed down 0.6 per cent on Monday when prices hit a low of $US4.22 for 1/2 a bushel, the lowest since August 29. USDA said 52 per cent of the U.S. wheat crop was in good to excellent condition as of Sunday, well behind market forecasts.

Oil

Brent crude extended its rally to a two-year high as OPEC and Russia signalled they'll prolong supply cuts, while instability in Iraq's Kurdish region persisted. The global benchmark eased 0.3 per cent on Tuesday to $US60.74 a barrel, and West Texas Intermediate was lower by a similar margin to $US54.01. Both crudes pulled back from Monday's highs as they moved closer to levels that signal they might be overbought. Supporting the rally was Saudi Arabian Crown Prince Mohammed bin Salman last week backing an extension of production cuts by OPEC beyond March, following similar signals from Russian President Vladimir Putin.