Data released earlier this morning showed China’s Caixin manufacturing purchasing managers’ index (PMI) stabilized in March; the index rose to 50.1 last month from a record low in February of 40.3. A reading above 50.0 indicates industry expansion, while a reading below that level indicates contraction.
This follows releases on Tuesday from the National Bureau of Statistics (NBS) that showed China’s official manufacturing PMI rebounded to 52.0 in March from a reading of 37.5 in February, easily surpassing the forecast reading of 44.9. China’s non-manufacturing PMI also underwent a strong recovery in March, bouncing up to 52.3 from 29.6 in February.
The stronger-than-expected readings have given hope to market participants that Chinese manufacturing is returning to normal following the Covid-19-related disruptions that hit the sector in the early months of the year.
“The rise [in the PMI data] was much higher than the market was expecting, and raised hopes that output at Chinese factories are returning to normalized levels,” ANZ analyst Rahul Khare said in a morning note.
But the overall positivity from the better data was cooled by a word of caution from analysts that the strong readings reflect that activity has improved modestly relative to the poor performance in February and not that activity has returned to pre-virus levels.
Despite this, the SHFE base metals were broadly up at the close of morning trading on Wednesday.
Tin was the best performer of its complex in terms of percentage gains, with the metal finding additional support from the news that AfriTin Mining has suspended operations at its Uis tin mine in Namibia after the country announced a 21-day lockdown. The lockdown will end on April 16.
The most-traded June tin contract rose to 122,680 yuan ($17,299) per tonne at the close of morning trading, up by 2,030 yuan per tonne or 1.68% from Tuesday’s close of 120,650 yuan per tonne.
Gains were also seen in June nickel at 92,840 yuan per tonne (+1.1%), May copper at 39,460 yuan per tonne (+0.79%) and May zinc at 15,235 yuan per tonne (+0.4%)
Aluminium and lead bucked the firmer tone of their peers, with June aluminum dropping by 0.3% to 11,560 yuan per tonne and May lead dropping by 0.3% to 13,850 yuan per tonne.
Other highlights
- The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was slightly up by 0.07% at 99.14 as at 11.41 am Shanghai time.
- The Shanghai Composite Index was up by 0.3% at 2,758.66 as at 11.30 am Shanghai time.
- It is a busy day for data on Wednesday with key releases that include final manufacturing PMI readings out across Europe and the United States. The US’ ADP non-farm unemployment change, construction spending, total vehicle sales and crude oil inventories are also due.