European Markets Higher on Chinese Economic Number

The momentum passed over by Asian markets to the European markets is on a stronger footing thanks to the Chinese economic data. The dollar rally has eased off once again against the basket of currencies as the US markets reopen for the New Year. Increasing number of disturbing tweets from Donald Trump over the past few weeks, has helped the precious metal which is trading well above the previous resistance of $1150. The black gold is also trading higher as the data from OPEC shows that the supply cut is going to be respected by OPEC and non OPEC members.

The economic data which dominates this week is the Euro area’s inflation and UK’s PMI numbers. Rising fuel prices should have made an impact on the inflation numbers in the Eurozone. The forecast for the UK’s manufacturing PMI is slightly on the weaker side. The previous reading was 53.4 and the forecast for today is 53.3. If we get a strong reading, it will could further strengthen the case that the UK’s economy is performing well despite the Brexit.

Back in Asia, the second biggest economy in the world has started the New Year off with a bang and has produced an economic number which has surprised the markets. The Chinese Caxin manufacturing purchasing managers' index posted its fastest rate of improvement for the last three years during the month of December. The number was much better than the reading in November coming in at 51.9. However, the non-manufacturing data which provides a clearer picture about the services sector was a little lower in comparison to previous month's number. It came in at 54.5 while November’s reading was 54.7.

Overall the data shows that the economy is performing very well and it is smaller and medium size business which have started to do much better compared to the bigger firms. The data provides much support for investor confidence and confirms that the Chinese economy is stabilising. Traders have been latterly anxious that the country's growth is still slowing down, but today's number has assured them that the picture has changed for the better.

As long as the domestic demand remains stable, the Chinese economy has a much better chance to improve its health and of course better export numbers will equally help with that.

The upbeat economic data coupled with a better domestic consumption number also eases the pressure on the PBOC to further ease their monetary policy. But what the policy makers will be closely watching is the relationship between China and the US as the newly elected president takes the office. Some shots have been fired already in this fragile diplomatic relationship, so the next few months should provide us with some interesting viewing.

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