Resource weakness weighs on bourse THE sharemarket fell yesterday as resources stocks suffered from further falls in commodity prices and the release of weaker economic data in China. High-yield stocks continued to outperform the broader market, amid expectations that the Reserve Bank would cut interest rates next week. The benchmark S&P/ASX 200 closed down 0.5 per cent at 5166.2, after falling as low as 5159.6. Share-trading volume shrank to $3.8 billion due to holidays in Asia and the Macquarie Australia Conference in Sydney. Investors are awaiting news from the US Federal Reserve meeting and the European Central Bank meeting. Also on the agenda are the US Institute for Supply Management's manufacturing purchasing manager's index tomorrow and Saturday's US non-farm payrolls data. Resources giant BHP Billiton fell 1.6 per cent after copper declined 1.4 per cent on the London Metals Exchange, and Nymex crude oil slipped 1.1 per cent. Also weighing on resources stocks was China's official manufacturing purchasing managers' index, which fell to 50.6 last month, slightly below market expectations. "The slight fall in the PMI reading for April shows that the economic recovery is still not on a solid foundation," China's Federation of Logistics and Purchasing said. The group pointed to weakness in new orders and new export orders, and said this was having an effect on purchases of raw materials. "I'm surprised the sentiment towards resources remains so weak," RBS Morgans investment adviser Christopher Macdonald said. China's PMI wasn't far below market expectations and it remained in expansion. I would be very surprised if a brand new government in China would allow its manufacturing to contract. Westpac rose 0.8 per cent amid growing expectations the bank would boost its dividend payout when it announces first-half results tomorrow. Of the other banks, ANZ fell 15c to $31.69, Commonwealth Bank dropped 50c to $72.95 and NAB eased 5c to $33.95. Telstra rose 1 per cent to $5.03 -- its highest point in almost eight years -- as investors continued to pursue the high fully franked dividend yields on offer. Telstra shares rose 10 per cent last month, and have almost doubled since late 2010. Traders said analysts could lift their price targets on Telstra, depending on the outcome of an informal meeting with chief financial officer Andrew Penn late yesterday. The Australian dollar was slightly lower in Asian trading as economic data raised the possibility of the central bank lowering interest rates next week. More weak Chinese data also affected sentiment in trade softened by May Day holidays across Asia, and with European markets likewise being closed. At 5pm AEST, the dollar was trading at $US1.0354, down US0.04c. The RBA board meets next week, with economists arguing that tame inflation allows for the year's first rate cut. In manufacturing, the Australian Industry Group's Australian Performance of Manufacturing Index was 36.7 last month, down 7.7 points from March. A reading below 50 indicates contraction. "We have been witnessing an already heavily bruised manufacturing sector as clearly the most vulnerable sector in the economy, an industry that's taken another body blow in April," said David DeGaris, senior economist at National Australia Bank.