Good news from China

Good news from China

China's official PMI figure printed at 50.2, squarely in line with market expectations. But this didn't stop AUDUSD sinking around 25 pips shortly thereafter. However, HSBC's figure turned the pair around, printing higher than the prior month (47.9 ) and expectations (49.1) at 49.5. Perhaps the most encouraging part of both reports is not only are both headline figures heading the same direction, up, but HSBC's new orders sub-index shot into expansion territory for the first time since this time last year. The rise in new orders suggests Beijing's attempts at stimulating the domestic economy are feeding into the real economy.

Overall, whilst the Chinese data is a positive for investor sentiment, the unofficial data highlights the pressure facing China's export sector. HSBC's figure is aimed at small, export based Chinese manufacturers. Hence, a good gauge for China's anticipated turnaround will be next week's export data. If we see another print like the last one - we think it will be slightly lower at 9.3% vs. 9.9% prior - then it will reaffirm our belief that China is on track for a growth turnaround in Q4.