China PMI stabilises but still far from bullish

Thursday, October 01, 2015

Asian equity markets managed to extend upward momentum during overnight trading, following Wall Street higher as investors seemed unfazed by pessimistic data. Both the Nikkei 225 and TOPIX indices led the charge higher despite a weaker business sentiment reading in Japan as both the Tankan Large Manufacturing Index and Outlook fell in Q3 from the previous quarter. The indices compiled each quarter by the Bank of Japan painted a mixed outlook, while overall sentiment was dampened Large All Industry Capex saw some growth as it accelerated to 10.9% y/y during the third quarter from 9.3% y/y the previous quarter.

Compounding worries for the region China’s manufacturing activity shrunk for a second straight month as the index compiled by the China Federation of Logistics and Purchasing held below the 50.0 point mark despite a marginal improvement month-on-month to 49.8 from 49.7. The final PMI reading from the Caixin media group confirmed the sluggish outlook, coming in at 47.2 in September against expectations of 47.0. Despite the lack of material improvement, stock indices across the region were lifted higher as investors interpreted the numbers as showing some stabilisation for the Chinese economy and with Chinese markets shuttered for the week long National Day holidays the general mood was broadly positive as European markets opened higher.

Three month LME copper prices were encouraged higher by the stabilising Chinese PMI data and while it was far from bullish, early signs of the recent PBOC intervention having the desired effects saw the red metal rally above the 50 day MA during the early hours of the morning. Copper prices have built on support around yesterday’s close of $5,160/tonne having pushed back above $5,000/tonne on Wednesday with activity early this morning see strong buying appetite above $5,200/tonne. Overall risk sentiment is still very fragile and investors will be eagerly anticipating today’s eurozone PMI data as well as jobs and manufacturing data in the US for any further insight into the state of the global economy.

Tankan businesss outlook slips in Q3

JPTFLMFG Index Japan Tankan Bus 2015 10 01 07 47 35

China's PMI stabilises in September

CPMINDX Index China Manufacturi 2015 10 01 08 37 02

3-M copper prices extend gains on stable PMI

LMCADS03 Comdty LME COPPER 3 2015 10 01 07 56 21

Events for today

CN Market Holiday 

0245

CN

Sep

Manufacturing PMI

0245

CN

Sep

Non-Manufacturing PMI

0245

CN

Sep

Caixin Manufacturing PMI

0855

DE

Sep

Markit Manufacturing PMI

0900

EZ

Sep

Markit Manufacturing PMI

0930

UK

Sep

Markit Manufacturing PMI

1230

US

Sep

Layoffs

1330

US

w/e

Jobless Claims

1445

US

Sep

Markit Manufacturing PMI

1500

US

Sep

ISM Manufacturing

1500

US

Aug

Construction Spending

1530

US

w/e

EIA Nat Gas

Topics: Copper, PMI, LME
More from: Kash Kamal