Chinese PMIs missed expectations, Aussie drives lower

Summary:

  • Chinese PMI failed to provide convincing signs of an economic recovery
  • Australian dollar moves down in response to the data
  • Business confidence in New Zealand a tad better in April

Still green shoots of recovery in China?

China’s Caixin PMI for manufacturing failed to beat expectations in April in order to deliver more convincing signals of the economic recovery in the world’s second largest economy. The index came in at 50.2, while the median estimate had called for 50.9, the previous reading was 50.8. In turn, the official manufacturing PMI fell to 50.1 from 50.5, missing the consensus of 50.5. First of all, we have to remind you that the Caixin PMI tracks managers’ sentiment among smaller firms whereas the official indices represent larger businesses as well as state-owned enterprises. The Caixin PMI’s details show that the employment component came back to a negative territory after hitting its 74-month high in March. On top of that, new orders rose at a softer pace than last month and it was mainly a result of subdued foreign demand. Backlogs of work increased at the slowest pace for three years and overall price pressure remained modest (both output charges and input costs edged down).

Caixin PMI decreased in April after the two months of decent improvements. Source: Markit

Encouraging rise in new export orders

Similar conclusions can be drawn from the official survey with one meaningful exception. Namely, the survey showed a significant improvement in new export orders - a rise to 49.2 from 47.1. Although the component remained still below the 50-point mark, a huge jump could bode well for the future. This is especially true if the US-China trade negotiations end with success leading to improved global trade activity. By and large, the China’s manufacturing sector failed to continue improving at a quicker pace this month but stayed above the critical 50-point line. A bit worse data came from the services sector as the official survey saw a drop to 54.3 from 54.8, falling short of the median estimate of 55. Overall, the official composite gauge declined to 53.4 from 54. Looking across markets one may notice that the Aussie dollar has been placed among the largest losers of somewhat disappointing readings from China. The Antipoden currency is trading 0.2% lower against the US dollar this morning being the worst performer in the G10 basket. Sentiment across Asian equity markets has been mixed following a set of Chinese PMIs. The Shanghai Composite is trading 0.5% up, whereas the Hang Seng (CHNComp) is losing 0.6%. A quick reminder: Japanese markets are closed until May 7.

The Australian dollar dipped in a knee-jerk reaction to the Chinese PMIs. The AUDUSD is trying to recover after reaching the trough in the vicinity of 0.7020. The first more notable resistance for bulls can be found at 0.7190. Source: xStation5

In the other news:

  • New Zealand’s business confidence index ticked up in April to -37.5 from -38, while the activity outlook index rose to 7.1 from 6.3

  • Australian private sector credit for March rose 0.3% MoM after rising at the same pace in February

Economic calendar: Sales figures from Canada and US consumer sentiment data
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