Asian markets gain despite Chinese PMI data
China’s services PMI slumps
Asian markets rose on Tuesday, with enthusiastic investor sentiment in the United States continuing to spill across the Pacific.
The gains came despite the release of shocking data detailing the fragility of the Chinese economy.
China's services PMI slumps
China’s National Bureau of Statistics (NBS) announced that its non-manufacturing Purchasing Managers’ Index (PMI) slumped from 53.3 in July to 47.5 in August. Not only did this come in far below the 52.0 that analysts polled by Bloomberg had predicted, but it constituted the largest single-month fall on record, excluding the COVID plunge of February 2020.
The second-worst services PMI print on record can be said to be a result of both immediate and longer-term factors.
The Delta variant of COVID-19 hobbled activity and market confidence in China throughout August. Although cases of the strain remained in their hundreds, authorities reintroduced a number of strict measures as part of the government’s zero-COVID strategy.
Regional officials who were thought to be insufficiently vigilant were relieved of their roles, while travel restrictions were imposed in and out of a number of major cities. In one notable case, a portion of one of the world’s busiest container ports was shut down after a single worker tested positive.
Others have pointed to the more systemic weakness of China’s post-COVID recovery, arguing that the weak services data is a consequence of a deflationary trend unleashed by the nation’s negative credit impulse.
China’s manufacturing PMI offered scant solace. The metric fell from 50.4 in July to 50.1, the lowest print since the coronavirus crash and within touching distance of a contracting.
US bullishness offsets China anxiety
Although the NBS data can be said to have upset markets, Asian stocks ultimately finished Tuesday well, bolstered by bullishness in the US.
Both the S&P 500 and Nasdaq Composite traded at all-time highs on Monday, boosted by Federal Reserve chair Jerome Powell’s recent dovish address at Jackson Hole. Although he admitted it could start by the end of the year, the central bank head laid out no exact timeline for when the tapering of bond-purchasing will begin.
By the close, the Hang Seng Index traded up by 1.3%, while the Bombay Sensex and Nikkei 225 stood 1.1% and 1% higher. The Shanghai Composite Index closed 0.4% higher.
Further reading: Powell: Tightening could start by year end