Chinese Manufacturing PMI Contracts Heavily Big Market Blow Expected

A big blow for the Chinese and broader global economy, as it reported a heavy contraction in manufacturing activity. The number plunged in February as the coronavirus took hold, falling to 35.7 this month, an all-time low and down from 50 in January, China’s National Bureau of Statistics announced on Saturday.

Do note, a number below 50 indicates a contraction in activity and a number above that is growth for the sector. However, this of course largely shrinking, which sparks much concern for the markets.

The factory activity in China contracted at the fastest pace on record in February, highlighting the damages already seen from the coronavirus outbreak on the world’s second-largest economy.

In terms of this batch of data, it does suggest deepening cracks in an economy already hit by the trade war as the coronavirus forces widespread transport curbs and tough public health measures which have paralyzed economic activity.

When China reports its Q1 2020 growth it is already widely expected to suffer another sharp blow, some even expecting as low as 2.0% year-on-year.

What does this mean for the market?

We are anticipating some sizable gaps at the market open, with continued risk-off/safe-haven flow eyed next week. For a full understanding and how to implement this into the technicals with us, check out our membership.


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