China data lifts Asian equities

China PMIs boost equity markets

Wall Street beat a modest retreat overnight, except the Nasdaq, which one again, powered higher, boosted by Apple, Tesla and Zoom. The S&P 500 fell 0.23%, the Nasdaq rose 0.68% to another record high, and the Dow Jones lost 0.80%.

After a slightly negative start in Asia, positive China data has lifted spirits across the region, with stock markets unwinding early losses. China’s Caixin Manufacturing PMI for August again impressively outperformed. The Caixin PMI rose to 53.1 in August, up from 52.6 in July. This reading points to expansion in the manufacturing sector and reinforces the notion that China is leading the region out of the pandemic recession. The result was more pleasing as the official Manufacturing PMI yesterday stalled, with a reading of 51.o. This was virtually unchanged from the previous reading of 51.1. There was better news in the services sector, as the Services PMI rose to 55.2, up from 54.2 beforehand. The net result between the two releases suggests that China is firing on nearly all its cylinders.

The Nikkei 225 is flat, with the Kospi rising 0.90%. China’s Shanghai Composite and CSI 300 have risen 0.15% with the Hang Seng up 0.10%.

Singapore remains in negative territory, lower by 0.50%, but Kuala Lumpur, Jakarta and Manila have climbed around 0.25%. Australia is the region’s laggard as the Australian dollar climbs to highs last seen in late 2018. The detention of an Australian journalist by China has also raised the trade relations temperature, whilst weak property price data has added another cloud. Although I believe the effects are transitory, the ASX 200 and All Ordinaries have sunk by 2.20% today.

Australia aside, the China data should give markets a boost of cautious optimism that should flow over into European equities this afternoon. Although the ascent of the euro and pound may temper economic recovery exuberance.

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