Chinese markets may be closed for the next week due to a national holiday but China’s goalseeked manufacturing survey(s), which were the most anticipated data points of the evening, came right on schedule (or rather, were leaked just ahead of schedule). And they certainly did not disappoint in their disappointment.
First, it was the official NBS September PMI, which at 49.8 was the smallest possible fraction above both the previous and expected, both of which were 49.7. The number was leaked about 6 minutes before the official statement, and while the leaked print which all humans were aware of well before the official release time at 9pm Eastern, had no impact on markets, it was the flashing red headline which confirmed the leak and which was read by machine-reading algos everywhere, that sent the E-mini spasming higher.
But while the official “data” was bad, and confirmed the economy remains in contraction, the Caixin – aka the new HSBC – Markit PMIs were absolutely atrocious.
We bring you… the HSBC Manufacturing print, which dropped from 47.3 to 47.2, and which according to Caixin was the lowest print since March 2009.
From the report:
A key factor weighing on the headline index was a sharper contraction of manufacturing output in September. According to panellists,
worsening business conditions and subdued client demand had led firms to cut their production schedules. Weaker customer demand was highlighted by a further fall in total new orders placed at Chinese goods producers in September. Furthermore, the rate of reduction was the steepest seen for just over three years. Data suggested that the faster decline in total new business partly stemmed from a sharper fall in new export work. The latest survey showed new orders from abroad declined at the quickest rate since March 2009.
The job market continued to be a disaster:
Reflective of lower workloads, manufacturing companies cut their staff numbers again in September.Moreover, the latest reduction in employment was the fastest seen in 80 months. Meanwhile, reduced production capacity led to an increased amount of unfinished work, though the pace of backlog accumulation was only slight.
And then there’s deflation:
Manufacturing companies noted a further steep decline in average cost burdens during September.Furthermore, the rate of deflation was the sharpest seen since April. Reports from panellists mentioned that lower raw material prices, particularly for oil-related products, had cut overall input costs. Increased competition for new work led manufacturing companies to generally pass on their savings to clients, as highlighted by a solid decline in output charges.
Summarizing the finding: Production cut at quickest rate since March 2009; Total new orders contract at sharper rate amid steeper downturn in new export business; Worst deflation since April; job shedding accelerates to 80-month record, and so on.
At the same time, the Service PMI was also released which at 50.5, was a drop of 1 point from the 51.5 in August, and was the lowest since July 2014, with the prices charged index in full deflationary collapse, tumbling from 51.4 to 48.5, the lowest since June 2012, with the outstanding business index was the lowest since last November. In short: another disaster.
And it was the combination of the two indices that told the full story: at 48.0, the Caixin Composite index dropped from 48.8, down from 52.3 a year ago and was the lowest print on record.
So with another month of atrocious manufacturing and service survey data released what do futures do? Why they soar of course, with the ES now up nearly 20 points from its overnight lows, and touching on 1920.
Why? Who knows – futs would have likely soared if the data was good, but wild guess here, because the Chinese economy is in such a dire state of uncontrollable freefall, someone, somewhere has to print more and make the rich even richer.