Well, well, well, China has surprised on the upside with the better than forecast early estimate of activity in the country’s huge manufacturing sector.
The news took markets by surprise, and no doubt left those remaining China ‘bears’ again looking foolish.
In fact it was the third time in a month that China has surprised on the upside with solid or better than forecast economic data.
As a result, markets across Asia, including the Aussie dollar, improved in afternoon trading after opening weaker from Wall Street’s Fed hangover fall last Friday night.
But they still mostly closed weaker.
The stronger sentiment on markets didn’t continue into European and US trading where shares and commodities were down. As a result we will start on a weaker note this morning.
The “flash” version of the China manufacturing Purchasing Managers’ Index, published by HSBC and Markit, rose to 51.2, compared to August’s final result of 50.1 and market forecasts for a reading of 50.9.
It was a six month high for the index and came two months after it plunged to an 11 month low of 47.7.
Economists said the details of the report were solid, with the subindex for new export orders swinging to a gain, while output and overall new orders both rose at a faster rate than in the previous month.
Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co- Head of Asian Economic Research at HSBC said:
“The HSBC Flash China Manufacturing PMI rose to a six-month high in September, adding further evidence to China’s ongoing growth rebound.
"The firmer footing was supported by simultaneous improvements of external and domestic demand conditions. We expect a more sustained recovery as the further filtering-through of fine-tuning measures should lift domestic demand."
Details of the report were relatively bullish, with the subindex for new export orders swinging to a gain, while output and overall new orders both rose at a faster rate than in the previous month.
The employment subindex slowed its rate of fall, and work backlogs grew faster.
The final version of the September report is out on the 30th of this month, with an official government survey out on October 1.
Markets across Asia picked up after the report was released just before midday Sydney time.
The local market halved its losses by the close of trading yesterday afternoon to around a 25 point dip for the ASX 200.
More crucially, the Aussie dollar recovered the 94 USc in the afternoon after trading around 93.80.
It traded around 94 USc last night, as investors shook off the impact of the Fed’s failure to start reducing its special stimulatory spending regime. But it jumped to close to 94.50 in late trading as so-called risk on investments appealed.
Gold prices fell by around half a per cent to $US1,320 an ounce in Asian trading, but recovered a little in European and US trading.
The ASX200 lost 24.4 points, or 0.5%, to 5252.3. The All Ords slipped 25.3 points, or 0.5%, to 5245.5.
That issue will came to the fore overnight with three senior Fed officials due to speak in the US.
Surveys of manufacturing for Europe showed a sharp rise – the best on two years, led by Germany.
The eurozone’s Preliminary composite purchasing managers’ index rising to the highest level in 27 months, boosted by activity in the service sector.
The index rose to 52.1 from 51.5 in August, signalling the largest rise in business activity since June, 2011.
Shares failed to respond to that news and the big win in the German elections by Chancellor Angela Merkel.
But the US survey of manufacturing saw a small fall to 52.8 from 53.1 as new orders and exports cooled.
