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China Data Rebounds Firmly
The latest data out of China overnight has painted an encouraging picture of the economic recovery underway there since the government abandoned its zero covid policy at the start of the year. The latest CAIXIN manufacturing PMI reading was seen jumping to 51.6 last month, up from 49.2 in January. As well as bouncing back into growth territory, the data reflects the largest monthly increase in the index in more than 10 years.
Looking at the breakdown of the data, there were more encouraging signs with several sub-sectors of the data recording their best readings in years. New orders rose to 54.1, their highest levels since Q3 2017. New export orders hit their highest level since Q1 2011 at 52.4. The employment reading was also seen rising firmly to 50.2, marking its first return to growth in two years.
Boost For Global Trade
Given China’s manufacturing importance in the global market, the data is a firmly positive signal for stocks and markets across the globe have seen better demand on the back of the data. The non-manufacturing PMI was also seen rising to 56.3, up from 54.4 in January. The employment sub-sector of this data set was also seen hitting its highest level since August 2018.
In all, the data is a strong signal that the Chinese economic recovery is in good health. Solid new orders figures show that demand is growing nicely while the uptick in employment indicators should feed into better consumer spending power to help further lift the economy.
Two Sessions Meeting Next Week
Traders now look ahead to the upcoming ‘Two Sessions’ meeting on March 5th. The annual meeting of the top Chinese legislative and political advisory bodies is likely to see the government setting a new higher GDP target on the back of this data. However, while the Chinese market is improving, external factors are still creating a drag and the year ahead will likely not be smooth for China. Still while data continues to improve, sentiment should continue to rally also.
Technical Views
USDCNH
The rally in USDCNH off the lows this year has seen the market breaking out above the bear channel from last year’s highs. However, the move has since run into heavy selling pressure with the pair now trading back inside the channel. In light of the move, focus is now back on a test of the 6.7811 level.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.