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Chinese PMI: is it all so bad?

Weak January Chinese PMI reading was one of the factors triggering risk aversion that pulled the stock markets down from record highs. On Thursday China added to market concerns as the HSBC flash manufacturing PMI fell from 49.5 to 48.3, moving further into the negative zone. 

However, the situation may turn to be not so dramatic as it seems now. The February data may not be that reliable due to the Lunar New Year holiday, so the recent weakness in market sentiment may only be short-term. In the recent weeks Chinese data has been trending higher and it could become a risk-positive factor if continued. What's more, the link between the weak China data and the emerging markets seems to be breaking down. 

Watch the official PMI manufacturing index on March 1 (Saturday). The figure is expected to hold above the 50 mark (Jan.: 50.5, forecast: 50.2). In this case the commodity currencies could extend their march higher. 

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