The aussie and kiwi dollar opened higher on Monday morning, cheering on better-than-expected China official PMI readings.
The manufacturing activity indicator swung back to the expansionary territory of 50.5 after three months of contraction, beating expectation of 49.5. It suggests that China’s fiscal and monetary stimulus – in particular tax cuts and easing liquidity towards the private sector – is doing its work to cushion the slowdown.
The PMI reading is in contrast to China’s industrial profit in January and February, which declined 14% in the same period last year. Falling factory output price (PPI), trade tariffs and a broad slowdown in global demand contributed to this. Analysts remain sceptical on a turnaround in corporate earnings anytime soon, and the expectation for further monetary easing in the form of an RRR cut is rising.
The Shanghai and Shenzhen Composite registered strong gains of 3.2% and 3.77% respectively last Friday, with volumes in both exchanges rising. A swing in PMI readings could be a sentiment boost for Greater China markets, although it is still too early to conclude that the economy has bottomed out.
Brent oil price advanced to US$68.5 on Monday morning, challenging a key resistance at US$68.2 area. Breaking out above this level will open room for further upside towards US$72.5 area. Its short-term trend remains bullish, as 10-Day SMA and SuperTrend (10,2) both sloped upwards. Oil’s performance last week was partially weighed by the strengthening dollar; if the dollar pulls back this week, oil prices could move higher. Traders will also look at this week’s DoE crude oil inventory data for supply-demand relationship clues.
Asian markets opened higher on Monday, backed by several positive catalysts – a rally in US equities on Friday; higher China PMI readings; oil prices; and an extension in US-China trade talks. Singapore’s Straits Times Index moved 20 points, or 0.6% higher to 3,233 points. Technology (Venture), offshore & marine (SembCorp Marine), financials (UOB), and Real Estates (HK land, City Dev) were leading the gain.
This week, traders will eye the RBA interest rate decision and Australia trade balance data on Tuesday for trading opportunities in AUD pairs. The US private payroll reports is revealed on Wednesday evening, as an early proxy of this Friday’s non-farm payroll number. Both are crucial data for the jobs market and thus will impact the US dollar and US equities.
The market calendar is packed for Monday too, as we have a string of European Markit manufacturing PMIs due this afternoon, followed by eurozone inflation readings. The US releases retail sales and ISM manufacturing PMI readings tonight.
China NBS manufacturing PMI
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.