This morning, traders got what they were hoping for—both Chinese and Japanese manufacturing PMIs reported well above expectations. The Purchasing Managers’ Index from HSBC printed at 50.8, exceeding the 49.7 median estimates of analysts surveyed by Bloomberg News and a final reading of 49.4 in May. A number above 50 indicates expansion.
Markets were elated by the reverse as Chinese PMI has printed in contraction since January. The Chinese manufacturing gauge rose to a seven-month high in June, supporting Premier Li Keqiang’s contention that the economy will avoid a hard landing as the government steps up efforts to spur growth. Chinese Premier Li Keqiang says China’s economy would not suffer a hard landing and would continue to grow at a medium to high pace in the long term without strong stimulus. Mr Li made the comments during a speech in London’s financial district on the final day of a visit which has yielded trade and investment deals worth just over $23 billion and strengthened Britain’s bid to become the dominant centre for the Western trade in offshore yuan.
Mr Li said he expected China’s economy, the world’s second-largest behind the United States, to grow at a minimum clip of 7.5 per cent, confounding critics, including the International Monetary Fund (IMF), who say the country’s rapid growth may eventually falter.
The positive data supported the Aussie and the kiwi with both rallying with exceptional gains this morning. The AUD is trading at 0.9437 up by 47 points while the NZD gained 38 points to reach 0.8734. Asian stocks and the Australian dollar rose after the report suggested the government’s measures will protect its 2014 growth target of about 7.5 percent even as fixed-asset investment gains slow and the property market slumps. Li said last week that his officials are making adjustments to aid expansion without resorting to “strong” stimulus.
The official government manufacturing PMI from the National Bureau of Statistics and China Federation of Logistics and Purchasing will also be published July 1. That gauge rose to 50.8 in May, the highest reading since December, from 50.4 in April.
The Japanese yen is also climbing this morning against the greenback and euro after Japanese flash PMI beat expectations. Japanese manufacturing activity expanded in June for the first time in three months, a preliminary survey showed on Monday, in a sign that domestic demand has quickly recovered from a sales tax increase at the start of April. The Markit flash Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 51.1 in June from a final reading of 49.9 in May. The index rose above the 50 threshold that separates expansion from contraction for the first time in three months. The output component of the flash PMI index rose to 51.8 from a final 48.9 in April.
The Aussie is trading near a record high at 0.9437 and the kiwi is at 0.8734. The Nikkei climbed this morning to trade at 15341 while the Australia S&P/ASX climbed to 5408.
