Private Sector PMI Data from China Boosts AUD/USD and ASX 200 in Asia Market News

Highlights

• In February, the China Caixin Manufacturing PMI rose from 50.8 to 50.9, accompanied by an increase in new export orders.
• The PMI data from China prompted a positive response from the AUD/USD and ASX 200 on Friday.
• The Nikkei 225 reached 40,000 following the Thursday overnight US inflation statistics.  

China's Manufacturing Sector Activity: February Insights

On Friday, attention was drawn to the Chinese economy, particularly the release of private sector PMIs for February, which garnered investor interest.

NBS Manufacturing PMI and Non-Manufacturing PMI

The NBS Manufacturing PMI saw a slight decrease from 49.2 to 49.1, while the Non-Manufacturing PMI showed an improvement, rising from 50.7 to 51.4. Expectations were set at 49.1 and 50.8, respectively.

Caixin Manufacturing PMI: Key Indicator

The Caixin Manufacturing PMI, carrying more significance, rose from 50.8 to 50.9 in February, contrary to economists' forecast of a decline to 50.6.

Survey Highlights

Insights from the February Survey include:

• Notable increase in manufacturing production, marking the highest pace since May 2023.
• Continuation of the uptrend in new export orders, signaling improved demand conditions.
• Expansion of purchasing activity driven by a favorable demand environment.
• Decrease in unfinished business despite reductions in headcounts.
• Slowing rate of cost inflation, with input prices rising at the slowest pace in seven months.
• Reduction in selling prices aimed at attracting new business.

Market Outlook and Policy Focus

The pickup in new overseas orders is seen as a potential alleviation of deflationary pressures. Attention now shifts to Beijing, where lawmakers will convene to discuss economic forecasts and policies. Market optimism persists regarding the possibility of a fiscal stimulus package to support the Chinese economy following recent monetary policy measures.

Market Reactions and Indices Performance

AUD/USD Response

The AUD/USD experienced fluctuations in response to the NBS PMI, initially dropping before climbing to a post-report high. Similar trends were observed following the Caixin Manufacturing PMI release, with the Aussie dollar eventually up by 0.13% to $0.65060 by the end of Friday.

AUDUSD 15 Minute Chart 010324

ASX 200 and Hang Seng Index Performance

The ASX 200 responded positively to the better-than-expected private sector PMIs, showing a 0.20% increase to reach 7,714.2. However, the Hang Seng Index remained in the red despite signs of a partial recovery from early lows, ending the day down 0.20% to 16,478. In contrast, the Nikkei 225 saw a significant rise of 1.62% to 39,801, fueled by overnight US inflation data, which raised expectations of a Fed rate cut in H1 2024.

ASX200 15 Minute Chart 010324

Probability of Fed Interest Rate Decision

According to the CME FedWatch Tool, the likelihood of the Fed maintaining interest rates at 5.50% decreased from 36.8% to 34.5% on Thursday, reflecting market sentiments influenced by recent economic data and projections.