Stocks in mainland China declined on Monday after data showed another contraction in the country’s manufacturing sector, reducing hopes that the world’s second-largest economy will post a turnaround in the fourth quarter.
China’s official manufacturing PMI indicator remained unchanged at 49.8 in October, data from the National Bureau of Statistics showed on Sunday.
A separate gauge of Chinese factory activity on Monday suggested that manufacturing output had improved last month, but remained in contraction territory. The Caxin manufacturing PMI rose to 48.3 in October from 47.2 the previous month. A reading below 50 signifies contraction.
“The slight upswing shows the manufacturing industry’s overall weakening has slowed down, indicating that previous stimulating measures have begun to take effect,” said Dr. He Fan, chief economist at Caixin Insight Group. “Weak aggregate demand remained the biggest obstacle to economic growth, and the risk of deflation resulting from the continued fall in the prices of bulk commodities needs attention.”
China’s National Bureau of Statistics also reported on Sunday another slowdown in the country’s service economy. China non-manufacturing PMI slipped to 53.1 in October from 53.4 in September, official data showed.
Chinese stocks were down across the board on Monday, with the Shanghai Composite Index falling 57.48 points to 1.7% to 3,325.08. The CSI 300 Index – which tracks stocks traded in Shanghai and Shenzhen – fell 58.12 points or 1.6% to 3,475.96.
Hong Kong’s Hang Seng Index closed down 270 points or 1.2% at 22,370.04.
Japanese stocks were also down, with the Nikkei 225 Index plunging nearly 400 point or 2.1% to 18,683.24.
Signs of continued weakness in China’s manufacturing sector put pressure on oil prices on Monday. The price of North Sea Brent crude fell 70 cents or 1.4% to$48.86 a barrel on the ICE Futures exchange Europe. The West Texas Intermediate (WTI) benchmark for US crude fell 74 cents or 1.6% to $45.85 a barrel on the New York Mercantile Exchange.
A slowing Chinese economy is just one of the many factors weighing on global crude prices. Peak OPEC production, the US shale boom and more efficient production processes have all contributed to the global supply glut. The prospect of more Iranian oil flooding the market in the coming months could also exacerbate the supply glut in the coming months.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.