A much worse-than-expected China NBS manufacturing PMI reading in February will probably propel a sell-off on Monday morning, with risk currencies AUD and NZD falling the most among G10 currencies, whereas JPY is on the rise. The Nikkei 225 fell more than 1% in early morning trading, and US equity futures opened lower.

China manufacturing PMI plunged to 35.7 and non-manufacturing PMI tumbled to 29.6 last month, largely due to the coronavirus lockdown in most provinces that inhibited business activities. This is the lowest reading ever in history, even below the period of the sub-prime mortgage crisis. This may prove to be a one-off, as factories in the coastal provinces gradually resumed operations at the end of February, or will do so in early March. The uncertainty remains high in overseas markets, where the impact of the virus has just started to emerge. Disappointing China data could mirror the situation in other Asian countries, especially Japan, South Korea, and Singapore.

The Reserve Bank of Australia (RBA) is due to release its interest-rate decision on Tuesday. The market has seemly priced-in a rate cut scenario given the rapidly deteriorating business sentiment due to coronavirus’ global impact. AUD/USD has come off to a decade low of 0.650 area this morning. Technical indicators RSI and DMI suggest that the currency pair has been severely oversold and is due for a technical rebound.

China eased the listing rule for IPOs and corporate bonds on 1 March, an initiative aimed to allow greater corporate access to financing to cushion the impact of the virus. However, an increased pipeline of equity and bond supply is likely to drain liquidity from the secondary market and thus inhibit the benchmark index from climbing higher.

China NBS Manufacturing PMI – Feb 2020