Strong Chinese Data To Set Europe Off Higher

Chinese manufacturing sector expanded at the fastest pace in 11 years. Manufacturing PMI data from UK, EZ and US ISM Manufacturing data in focus.

Uptrend 3

Whilst Wall Street traded broadly lower on Monday with both the S&P and the Dow Jones closing in negative territory, the Nasdaq finished higher. This was by no means indicative of the month. In fact August was the best month for US stocks in over 15 years thanks to a shift in Fed policy framework and continued reassurance from the Fed that interest rates will remain lower for longer

Overnight, Asian markets booked gains and Europe is pointing to a stronger start after Chinese data showed that the vast manufacturing sector continued to recover after the coronavirus pandemic.

China manufacturing sector expands at fastest clip in 11 years
The Caixin Chinese manufacturing PMI rose to 53.1 in August, up from 52.8 in July in the fourth straight month of growth. Expectations had been for a slight dip to 52.6. The data revealed that activity in the sector expanded at the fastest pace in almost a decade as new export orders rise for the first time this year. This indicates that after a period of drought caused by the coronavirus lockdown, foreign demand is starting to pick up as economies across the globe reawaken from their lockdown slumber. The employment gauge in the report showed that some companies were starting to increase recruitment to meet production needs, although the gauge remains in negative territory. 
UK miners could see a lift on the back of the upbeat Chinese data, which has boosted metal prices overnight. 

Manufacturing PMI’s to show continued recovery (except Germany)
Manufacturing PMI’s for UK, Europe and US are due to be released. Manufacturing sectors across the board have broadly performed better than service sectors through and after lockdown, simply because they were not as  affected. The UK’s manufacturing sector is expected to remain steady in expansionary territory at 55.3. The Eurozone is also expected to confirm 51.7. However, weakness is expected from Germany which could see the initial reading downwardly revised to just 50 down from 53.

This week is a busy week for US data, culminating in the non-farm payroll on Friday. Prior to that US ISM manufacturing is expected to continue reflecting moderate growth. Even so this is not expected to be sufficient to halt the US Dollar’s decline. Whilst the PMI is expected be 54.5, weakness in employment could add further pressure to the greenback.

More from FTSE 100

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.