Mixed picture on Chinese manufacturing data; Aussie dollar recovers some ground

<p>Chinese manufacturing data out over the weekend will probably be taken as a positive for the markets, judging by the way risk currencies and the […]</p>

Chinese manufacturing data out over the weekend will probably be taken as a positive for the markets, judging by the way risk currencies and the Australian dollar in particular have responded early Monday morning.

The numbers showed a mixed picture. The official Purchasing Managers Index for China showed an unexpected improvement in March, reaching levels near a one year high. The measure climbed to 53.1 compared to 51.0 in February so the direction and rate of increase was definitely positive.

The unofficial HSBC index published a number not as positive but not disastrous either. The PMI numbers, copper price and also renewed improvement in seaborne iron ore prices are all positive indicators of overall Chinese health.

We note iron ore in particular, given its falls late last year and still historically high levels. The iron ore price fell from around US$190 per tonne to around $120 during the third quarter last year but has since come back to around US$140.

Prices are still at least double the rate of a decade ago and China remains by far the largest global producers of steel. Copper around US$3.87/lb is a long way away from the GFC lows and even last year’s bottom near US$3/lb – so again, another bullish sign with China the largest marginal buyer in that market.

As energy prices moderate from recent highs, so too should the inflationary pressures on the Chinese economy which might open the way for more easing.

The Australian dollar was last buying 1.0432 against the US dollar. The Euro is consolidating at recent levels, last at 1.3369 against the dollar. The US dollar was last buying 82.80 Japanese Yen with the 82-83 range still holding.

Gold prices remain sluggish, hovering around US$1673/oz.

In regional corporate news, Singapore’s DBS Group is in a trading halt with reports suggesting it plans to buy Indonesia’s Danamon Bank.

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