China's preliminary PMI falls to 12 month low

Thursday, April 23, 2015

China’s manufacturing PMI reading fell further below the 50 point mark, dropping to a 12 month low in April as efforts by policymakers in Beijing have seemingly failed to provide the necessary boost to an ailing economy. Heading lower for a third straight month HSBC’s preliminary PMI reading came in at 49.2 in April, slightly lower than the 49.6 expected by market participants. The bearish data compounds on last week’s softer Q1 GDP data which saw the economy grow by 7% y/y, its slowest pace since 2009, strengthening the case for further easing and stimulus. Adding to the already long list of challenges facing the Chinese economy the Finance Ministry announced that revenues at SOE’s fell 6% y/y to 10.3tn yuan during the first quarter of 2015 as profits fell 8% y/y in Q1 dragged down by significant underperformance in steel, iron ore, coal and petrochemicals.

Despite a weaker than expected PMI reading, Chinese mainland stock indices extended gains overnight as investors broadly chose to ignore the weaker data, instead focusing on the recent PBOC stimulus announcement - hopeful that central bankers would introduce additional monetary easing measures. With Chinese factory activity stubbornly refusing to improve despite considerable intervention by the PBOC and policymakers in Beijing investors are hopeful that the release of strong eurozone and US manufacturing data will boost sentiment.

The dollar index snapped a two day bull run as investors breathed a sigh of relief after Greece managed to gain access to emergency funding. Safe haven demand for the greenback was abruptly halted as the ECB increased the amount of emergency funding available to the indebted nation with the pound sterling gaining significant ground against the USD, closing above 1.5000 yesterday for the first time since early March. Having risen 9.4% against a basket of currencies since the start of the year investors are concerned that the dollar index may be overbought and with the sell-off which at one point saw DXY fall back towards 97.429 throughout the day triggered by only a tentative conclusion regarding Greece’s debt commitments, any further progress between Greece and eurozone finance ministers could see demand for the USD fall back in the near term. Sterling gained further support for the move higher after the release of the BoE minutes which showed the MPC voted 9-0 to keep rates on hold as members expressed concerns regarding the risks of low inflation.  

China's flash PMI reading for April slips further below 50.0

MPMICNMA Index HSBC China Manuf 2015 04 23 07 35 07

GBP gains ground against USD after BOE minutes

GBP Curncy British Pound Spot 2015 04 23 07 59 56

Events for today

0245

CN

Apr

HSBC Manufacturing PMI

0900

EZ

Apr

Markit Manufacturing PMI

0930

UK

Mar

PSNCR & PSNB

1330

US

w/e

Jobless Claims

1500

US

Mar

New Homes Sales

1530

US

w/e

EIA Nat Gas

1600

US

Apr

KC Fed Manufacturing

All times UK Local Time

 

Topics: GDP, ECB, PMI, EUR, DXY, GBP
More from: Kash Kamal