Beat in Chinese PMIs sends market into risk-on mood

8:00 AM December 2, 2019
  • Official Chinese manufacturing PMI jumps above 50 pts

  • PMI for small and private companies confirms improvement

  • Some warning signs can be spotted in private data

Official Chinese PMI indices for November were released on Saturday. An improvement was spotted in manufacturing and services sectors. Manufacturing gauge jumped 0.9 pts to 50.2 pts. This was the highest reading since March and the first since April to show manufacturing index above the contraction/expansion threshold of 50 pts. A point to note is that this improvement was confirmed by Caixin PMI index released today as it moved to 51.8 pts. Solid readings signal that stimulus measures undertaken by the Chinese government earlier this year may be taking effect. However, a signal-month reading is not enough to call a turnaround therefore investors should wait for a confirmation in December and January. While official PMIs, that track big and state-owned enterprises, showed improvement in almost all subindices, data from private enterprises released today showed that output and new orders subindices declined against the previous month. Nevertheless, markets seem to be buying “recovery” rhetoric with stock market indices all around the world trading higher at the beginning of a new week.

An improvement was spotted in almost every subindex of the official Chinese PMI for November. However, rebound in new orders is not mirrored in the data for small and private companies. Source: Bloomberg

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