Markets slammed by weak China data

The true impact of the spread of CoVid-19 is starting to be felt, which China’s PMI data falling off the proverbial cliff last month. February was the first month the virus really started to hit the headlines and take hold, and the first set of data from China for the month gave an insight as to how deep the impact is likely to be.

Massive PMI hit from virus

China’s manufacturing PMI slumped to 35.7 last month, well below analysts’ forecast of a fall to 46.0 and sharply lower from January’s 50.0 print. Needless to say, that was the lowest print on record and the first reading below the 50 contraction/expansion threshold in six months.

In response to the data, China’s National Bureau of Statistics said the index had a “relatively large impact” from the coronavirus outbreak. Transportation, catering, and tourism were among the sectors most affected by the virus, as people avoided public gatherings. New export orders fell to 28.7 from 48.7 while production slumped to 27.8 from 51.3 the previous month.

The Caixin manufacturing PMI for February released this morning was not quite as dire as the official reading. It fell to 40.3, the lowest on record since 2004, versus market expectations of a drop to only 46.0. The output sub-index fell to 28.6 from 52.0 and production, new orders and employment fell at the sharpest pace since records began.

Wall Street indices rebound from opening slump

The fear of a protracted fight against CoVid-19 has heightened fears about global growth, and US equity indices have traded negatively since this morning’s open. US indices fell, with the US30 index dropping as much as 3.2% in limited liquidity, but is now down just 0.49%. The SPX500 is down 0.67% and the NAS100 slid 0.41%.

Other indices are trading positively, the assumption being that the poor numbers can be solely attributed to the virus effect, which is assumed to be a likely temporary phenomenon. China shares lead the way with a 3.2% gain on the day followed closely by the HongKong33 index at +2.0%. The Germany30 index has climbed 0.71% and is facing the first up-day in eight days.

Germany30 Daily Chart

Source: OANDA fxTrade

More PMIs on the way

The rest of the world also releases PMI data for February today, but are not expected to crash in the same fashion as China, since the virus spread only accelerated outside China in the second half of the month.

The final readings from Markit are due for Germany, the Euro-zone, the UK and the US. Preliminary readings were 47.8, 49.1, 51.9 and 50.8, respectively, with a growing risk that they could be marked lower. The ISM reading for the US is seen slipping to 50.5 from 50.9.

Aside from the PMI fest, Hong Kong’s retail sales for January are also scheduled, and are unlikely to make pleasant reading. Polled economists expect a contraction of 30.5%, even with the timing of the Lunar New Year in January this year. That would be the worst contraction on record going back to 2012.

The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Andrew Robinson

Andrew Robinson

Senior Market Analyst at MarketPulse
A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentary and live market analysis throughout the Asia-Pacific region. Having previously worked in Europe, since moving to Singapore he worked with several leading institutions including Bloomberg, Saxo Capital Markets and Informa Global Markets, proving FX strategies based on a combination of technical and fundamental analysis as well as market flow information. Andrew began his career as an FX dealer with NatWest and the Royal Bank of Scotland in the UK.