Better than Expected Chinese PMI Boosts Risk-On Trade

(eToro Blog) With China’s economic growth seen as the key to global growth, any news which would otherwise have been considered inconsequential is now a market mover. Such is the case with the Markit Economic’s Flash HSBC Purchasing Managers Index, a preliminary look at the results of a survey of the country’s official manufacturing sector data, which will be released next week.

Markit reported that China’s PMI data rose for the month of July to 49.5, improving from June’s 48.2 and edging closer to the 50.0 threshold which separates a contractionary and expansionary environment. According to the statement which accompanied the report, the overall reading’s improvement can be attributed to the recovery of the new orders sub-index, which improved to a 3-month peak and new export orders also had its best reading in several months.

July’s HSBC PMI was the best in five months, and suggests that Beijing’s efforts to stimulate the economy are finally bearing fruit. But analysts point out that the PMI reading has been unable to breach the 50.0 reading threshold over the past nine months, and Beijing is likely to maintain or enhance pro-growth policy until it does.

The Chinese data helped to give the commodity-linked Australian Dollar a push, with the AUD/USD pair trading higher at 1.0301 up from the 1.0289 price ahead of the data release. Also supporting the Aussie Dollar, the Reserve Bank of Australia’s governor Glenn Stevens said earlier that the Australian economy is currently undergoing changes which would enable it to resist future global shocks better, but that the government was ready to provide accommodation if the economic outlook deteriorated significantly.

On OpenBook, sentiment on the AUD/USD is currently bearish, with 64% selling against 36% buying. OpenBook trader kanchan1989 from India has closed out a number of short positions in the pair within the last 24-hours, with gains which ranged from 2.0% to 9.0%. The trader, a relative newcomer to OpenBook who already has 9 copiers and 13 followers, has had consistent single-digit gains in the pair over the past quarter, though the allocation has varied from 11% to 16%. For the trader’s overall portfolio, the profits have been strong, with a gain of 56.6% over the last week and 229.6% over the last month; a 9.8% profit for the quarter suggests the trader may have had a rough start which clearly has since smoothed out.

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