China February flash PMI hits seven-month low, spooks markets

Wed Feb 19, 2014 11:36pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Adam Rose

BEIJING (Reuters) - Activity in China's factories shrank again in February, a preliminary private survey found on Thursday, reinforcing concerns of a minor slowdown in the economy and spooking markets across the region.

The flash Markit/HSBC Purchasing Managers' Index (PMI) fell to a seven-month low of 48.3 in February from January's final reading of 49.5, where a reading below 50 indicates a contraction while one above shows expansion.

The Lunar New Year festival, which began on January 31 and covered early February, likely affected factory output as manufacturers shut shop for China's biggest annual holiday.

The Shanghai Composite Index .SSEC gave up its early gains on the news, while Asian markets tumbled.

The yield on benchmark 10-year Treasury notes fell to 2.712 percent after the China flash PMI report, compared with Wednesday's U.S. close of 2.734 percent.

The yen, which often gains in line with investors' aversion to risk, got a leg up against its rivals after the China flash PMI report. The dollar's early gains unraveled and it slipped 0.3 percent to 101.97 yen, moving further away from a two-week high of 102.73 yen hit on Tuesday.

The Australian dollar lost nearly half a U.S. cent after the report was released, reflecting China's status as Australia's biggest export market. The New Zealand dollar fell two tenths of a U.S. cent.

"It looks like across-the-board weakness. The indexes should be more correlated with the export economy than the domestic economy," said Stephen Green, an economist with Standard Chartered bank.   Continued...

An employee carries a tyre at a tyre factory in Jiaxing, Zhejiang Province, January 27, 2014. REUTERS/William Hong