China PMIs show strong recovery amid US presidential debate chaos

September PMIs broadly surprised

Arriving ahead of expectations had been the Chinese official PMIs whereby both the manufacturing and non-manufacturing PMI topped consensus. Specifically, the manufacturing gauge came in at a 6-month high while the non-mfg PMI reading was the highest noted since November 2013. Caixin manufacturing reading for September edged down to 53.0 but remains well in expansion territory. The broad takeaway ahead of the National Day holiday in China from October 1-8 and for Hong Kong and Taiwan for the rest week had been continued strong rebound from the Chinese PMI readings.

A quick comparison of the Caixin PMI with the likes of the US and eurozone readings had seen this alignment of the recovery picture. Drilling deeper into the Chinese data, the new orders and export orders components across both the official and Caixin manufacturing readings had also been ones in red, reflecting the improvement in global demand. As a result, this had seen to a boost for market sentiment in Asia though fluctuations with the US presidential election unfolding in tandem had also been noted.

US presidential debate chaos

While items ranging taxes to climate change had been brought to the table in the first US presidential debate, most of what had been discussed in what appeared to be a chaotic name-calling session were not new to the market. In turn, that had a limited effect on market in the immediate aftermath of the debate. Other than making a reference to China surrounding the Covid-19 spread by President Donald Trump, trade policies had also not been discussed thus seeing to a lack of substantial reaction at this point. Some selling had however been noted across US futures and the erasing of gains for Asia later into the day. Despite the verbal brawl having been one to see to no change in Democratic nominee – also an Asia equity and FX friendly choice – holding on to the lead in polls, the mayhem of a debate had perhaps lifted the short-term risks of a contested election. One for risk sentiment.

USD/CNH however found little reasons to be alarmed at this point, still trading heavy in the narrow range into Wednesday. Despite the slight USD index strengthening, positive Chinese PMI readings keeping the downward momentum unchanged for USD/CNH, watching further downsides in the short-term. China’s absence from Thursday over October 1-8 would however make for low participation in the period.