Can Chinese manufacturing offset sluggish US and Eurozone activity?

Published: 23 November, 2012 13:54

China ShanghaiHSBC’s purchasing managers’ index (PMI) for China has rebounded into positive territory in November, for the first time in over a year. This month’s PMI is reported at 50.4, indicating growing manufacturing output which should be bullish for industrial commodity markets.

Chinese authorities continue to ease bank lending reserve regulations, and investment and domestic consumer demand are expected to rise, potentially halting recent declines in China’s growth rate. Whether this is sufficient to counteract falling exports to the still-fragile Eurozone and USA remains to be seen.

Attention in US markets is now focussing on the ‘fiscal cliff’ at the year’s end, with its potential to shock the US into further recession. However, some confidence is returning, with the latest figures from the US Conference Board showing 0.2% growth in October. The full effects of Hurricane Sandy are yet to work through the system, and consumer figures may be knocked back.

Recent hostilities between Israel and Hamas have introduced considerable volatility into oil markets this week, with intraday swings of nearly $2 hitting the price of Brent crude on Wednesday. Fears of escalating instability across the Middle East have unsettled oil markets, and although Saudi Arabia appears to be keeping a lid on social discontent, Iran continues to be a wild card.

Movements in the gold market have been more muted in the weeks following the pre-election plunge, with the metal trading in the $1710-1735 range. No clear trend is emerging, although a resolution of the ‘fiscal cliff’ could give the market some direction. More action is evident with silver, which has steadily risen to over $33 since dipping below $31 before the presidential contest. Opportunities for online traders will no doubt emerge, but the present volatility in oil holds promise for those who can hold their nerve and act quickly.

Related news topics

Leave a Reply