Data shows Chinese factory activity contracted in April

SINGAPORE – Stocks in Asia-Pacific appeared destined for a lower start on Monday, with data released over the weekend showing Chinese factory activity contracted in April.

Futures pointed to a lower open for Japanese equities. The Nikkei Chicago futures contract was at 26,740, against the last Nikkei 225 close at 26,847.90.

Australian stocks also looked poised for a lower start, with the SPI futures contract at 7,315. This compared to the S&P/ASX 200’s last close at 7,435.

Chinese economic data released over the weekend could weigh on regional investor sentiment on Monday. China’s manufacturing activity contracted at a sharper pace in April as Covid lockdowns hit industrial production.

The April official manufacturing Purchasing Managers’ Index fell to 47.4, a second straight month of contraction after March’s reading of 49.5, data from the National Bureau of Statistics showed on Saturday.

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The 50-point mark on PMI readings separates growth from contraction. PMI readings are sequential and represent month-on-month expansion or contraction.

A private survey also showed contraction in Chinese manufacturing activity, with the Caixin/Markit manufacturing PMI reaching 46, down from the previous month’s reading of 48.1.

“Omicron and the government’s zero covid policy were the main culprits for China’s decline in activity in April, disrupting industrial production and disrupting supply chains,” Rodrigo Catril of National Australia Bank wrote in a note.

“A sharp Chinese economic slowdown in the second quarter remains a realistic outcome at this stage and, if history is any guide, the global impact on growth will follow soon after,” said Catril, the firm’s currency strategist.

The data comes as mainland China has been grappling with its worst Covid outbreak since 2020 for weeks.

Markets in Hong Kong, mainland China, Singapore and Taiwan are closed on Monday for a public holiday.

Coins

The US Dollar Index, which tracks the Dollar against a basket of its peers, was at 103.191 after a recent bounce from levels below 102.4.

The Japanese yen traded at 130.02 to the dollar, even weaker compared to the below 128 levels seen against the dollar last week. The Australian dollar was at $0.7069 after falling above $0.714 the week before.

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