Two broad measures of Chinese manufacturing pointed to
weakness in March following declines in February. The
manufacturing weakness raises fears of the global economy once
again experiencing a summer slowdown as it has in the previous
First, the official Chinese Manufacturing PMI was released by
the National Bureau of Statistics. The report showed that
manufacturing output did increase in March from February but at a
rate below what economists had expected. The PMI increased to
50.9 in March from 50.1 in February but was well below the
forecasted reading of 52.0.
Economists and market watchers had been expecting a much
stronger reading as February was largely written off as a fluke
event due to the slowdown caused by the Lunar New Year holiday.
During this period, factories shut down and the entire economy
takes a break. However, the weaker than expected data in March
confirms that there is at least slight weakness in the Chinese
Later, the HSBC China Manufacturing PMI also showed slight
weakness, albeit less so than the official PMI. The differences
in the surveys come from their respective methodologies: the
official PMI focuses on the largest companies in China whereas
the HSBC survey uses a larger sample size of smaller companies.
Thus, they are not necessarily comparable and can be used in
tandem, rather than against one another.
The HSBC China Manufacturing PMI fell to 51.6 in March from
51.7 in February on expectations of a flat reading at 51.7. The
analysts at HSBC noted that operating conditions and production
levels have now improved in China for five consecutive months and
that total orders rose for the sixth consecutive month. "A number
of respondents attributed growth to strengthened client demand,"
wrote the analysts, who also noted that new orders, a good
leading indicator, increased, "albeit marginally."
Markets did not react to the news positively overnight.
Chinese shares fell slightly overnight by 0.1 percent, as
measured by the Shanghai Composite Index, however shares traded
as low as 0.42 percent following the data release. Top gaining
sectors included pharmaceutical companies and retail companies
with Information Technology and Industrial companies lagging.
Spot gold climbed as high as 0.4 percent to $1,603.94 per
ounce before erasing most of its gains. Spot gold traded
$1,598.18 per ounce as of writing, a gain of $0.50 or 0.04
percent. Oil prices weakened on the news with WTI crude declining
0.79 percent to $96.62 per barrel.
U.S. equity futures traded slightly lower as of writing as
S&P 500 futures fell a mere 0.30 after trading down as much
as 3.00 to 1,559.40. Tech-heavy NASDAQ futures rose 3.00 points
to 2,814.25 after declining as low as 2,807.25 following the weak
Chinese news. Overall, markets seem to be brushing off the data
and focusing more on other market events, mainly key central
banks this week and the European debt crisis.
Looking forward, markets will eye the Reserve Bank of
Australia's interest rate decision and accompanying statement
tonight at 11:30 pm New York time. Although the RBA does not
directly influence Chinese policy, the RBA board has a good eye
on the Chinese economy because of its economic ties to Australia
through raw materials exports. Thus, the RBA statement should
provide some clarity on the situation in China and also confirm
or refute the findings of the PMIs.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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