Chinese Manufacturing Expands The Most In Two Years

- Chinese Manufacturing Expands The Most In Two Years

  • [B]Europe AndMexico  To Join WTO Trade Talks[/B]

  • [B]Hong Kong[/B][B] Manufacturing Slows Slightly In  April[/B]

Manufacturing Activity Accelerates The Most In Two Years

The manufacturing sector expanded at the fastest pace in more than two years for the month of April according to the most recent purchasing managers survey. The index, released in the overnight, rose to 58.6 from a 56.1, the highest mark since the survey was established over two years ago. Subsequently, the survey results seemed to be heavily supported by increases in energy consumption and production, sectors included in the report. Incidentally, the figure also increases the possibility of even further interest rate hikes by the People’s Bank of China in the near future, as growth and inflationary pressures continue to accelerate. The country’s central bank has already increased reserve requirements three times in 2006, most recently once again last week, in efforts to curb pressures and reign in spending. However, as the report suggests, there may be more work needed in order to cool potential for economic overexhaustion.

Two More Additions To WTO Talks

In similar fashion to both Japan and Canada last week, Europe and Mexico have both applied to enter as third parties into the recent WTO trade talks between China and the US. The recent entrance by these two countries is being perceived as significant as it increases the number of nations that are forming a solidified view against China’s lax piracy laws. It is equally notable as the European Union is now China’s largest trading partner. Should China take the seemingly “gang up” approach by the industrialized nation the wrong way, it may make existing relationship between the two economies irreparable. Currently, external trade from the EU has increased by a whopping 22.5 percent, to 63 billion euros, in 2006. Mexican officials noted that it’s request stemmed from a “substantial trade interest in this dispute” as its trade with China has increased recently.

Brunswick Survey Dips To 52.9

Manufacturing activity slowed in Hong Kong according to the most recent Brunswick Purchasing Managers’ Index. Falling to a 52.9 in th month of April, the figure is comparably lower than the 53.4 witnessed in the month of March. Notably, output subcomponents fell to 54.3 from a 55.3 with both employment and output prices declining through previous figures. However, new orders with Mainland China seemed well supported, keeping any contraction to a minimum. Although widely disappointing, the figure still lends optimism to the underlying economy. The notion is being coupled with a continuously tight labor force that is spurring consumer spending and helping to bolster growth in the country. Incidentally, expectation remain high for a supported retail sales figure this week, scheduled for release in two days.

Technically Speaking

USDHKD Remains Above 7.8200 - Dipping back early in the session, the USDHKD surged well ahead of the 7.8200 figure in the overnight. However, with momentum now waning, as the pair consolidates, momentum indicators are suggesting profit taking heading into the Asian session. A death cross formation in stochastic is mixing well with a slow divergence in the MACD histogram. As a result, first up on Hong Kong dollar strength will be the 7.8200 psychological figure, coinciding with the 7.8190 (50 hMA) support barrier. A break lower will keep the selling tone maintained till the 7.8150 (200 hMA) level, where bids are likely to emerge.

Singapore Dollar Dips Lower - The Singapore dollar continued to weaken on the day, remaining well above the 1.5150 figure in the overnight. Now trading at 1.5152 at the New York close, the price is set for a retrace ahead of the weekend. Momentum indicators are confirming impending downside, with a steep MACD divergence. With resistance at the 1.5163 resistance trendline seller are likely to take the pair lower through barriers at even figures (1.5140-1.5130). Steep barriers at the 1.5130 (50/100/200 hMA) are set to cap any momentum, with a break lower targeting the 1.5100 figure.