Charting the Markets: China Factory Data Sends Global Equities Higher
The new quarter has started the same way the last one ended: Stocks are rising. China's markets might be closed for a week yet data showing Chinese manufacturing activity has stabilized is setting the tone. Asian stocks, as measured by the MSCI Asia Pacific Index, have jumped as much as 4 percent in two days after the worst quarter in four years. Almost $10 trillion was wiped off the value of global equities in the third quarter. The Shanghai Composite Index was the worst performing benchmark, with a decline of 29 percent. China-listed shares in Hong Kong — known as H-Shares — sank 28 percent.
On Thursday, Australia's dollar joined other currencies of commodity-producing countries in getting a lift from Chinese manufacturing data. Although the PMI index is still below 50, indicating a contraction, the report signals that five interest rate cuts since November and fresh rounds of infrastructure spending are helping cushion a slowdown in the economy. The Aussie sank 9 percent against the U.S. dollar last quarter, its biggest drop in two years.
China data gave Japan's Nikkei 225 Index a helping hand, along with a survey showing sentiment among large Japanese manufacturers is slowing. The latest Tankan index adds to a growing chorus of voices calling for the Bank of Japan to increase stimulus, as the economy risks sliding into recession for the second time since Prime Minister Shinzo Abe took office in 2012. Twenty-two of 35 economists surveyed by Bloomberg predict the BoJ will have to bolster already unprecedented stimulus, with 11 forecasting this will occur Oct. 30 when the bank reviews its inflation outlook. The Nikkei 225 Index slumped 14 percent last quarter, its worst performance in five years.
Copper is putting its worst quarter in four years behind it, thanks to Chinese factory data. The base metal jumped 3.8 percent on Wednesday after an Anglo American and Glencore venture said it plans to reduce production in Chile. The move is the latest in a wave of global production cutbacks following a slowdown in demand in China, the world's biggest user of the metal. Copper sank 10 percent in the third quarter. The Bloomberg Commodity Index, a measure of 22 raw materials, plunged 15 percent, the biggest slide in seven years.
Mark Barton is a presenter on Bloomberg TV. Follow him on Twitter @markbartontv