Headline shares of the Mainland China equity market rebounded on Friday, 04 January 2019, as broader sentiment encouraged after Caixin Services and Composite PMIs in China rose in December over the previous month. It's the highest in 6 months. Meanwhile buying was spirited on expectations of policy support after People's Bank of China on Wednesday relaxed its conditions on targeted reserve requirement cuts to benefit more small firms. In afternoon trade, the benchmark Shanghai Composite Index rebounded 1.8%, or 44.66 points, to 2,509.02. The Shenzhen Composite Index, which tracks stocks on China's second exchange, gained 2.24%, or 27.92 points, to 1,274.28. The blue-chip CSI300 index was up 2.3%, or 67 points, to 3,031.82.
December's service sector Purchasing Managers Index from media company Caixin came in at 53.9, above the 53.0 expected. Services put in another month of robust growth following a strong 53.8 gain in November. Added to the weak manufacturing PMI already released, that gave a composite read of 52.2, which is a five-month high. This final release completes the December round of PMIs, an internationally comparable series in which a reading above 50 is required to show expansion in the sector under survey. December's manufacturing numbers had roiled markets with shock weakness. The official PMI showed the first contraction in China's manufacturing sector since mid-2016. Caixin's version was also below 50, for the first time since May, 2017. The service sector certainly seems to have held up better.
CURRENCY NEWS: China yuan strengthened against greenback on Friday, as central bank set stronger mid-point rate. Prior to market opening, the People's Bank of China set the midpoint rate at 6.8586, stronger by 45 basis points from previous day's central parity rate.
OFFSHORE MARKET NEWS: US share market closed steep lower on Thursday, due to weaker than expected US manufacturing data and downwardly revised guidance from Apple. The rare warning of disappointing results from Apple sent a shudder through the market and reinforced fears among investors that the world's second-largest economy is weakening. A weak report Thursday on U. S. manufacturing also weighed on the market. The Institute for Supply Management said its index of manufacturing fell to its lowest level in two years, and new orders have fallen sharply since November. Manufacturing is still growing, but at a slower pace than it has recently. Growing signs of a slowdown in China weighed on the market, as did the U. S.-China trade dispute, which threatens to snarl multinational companies' supply lines and reduce demand for their products. Investors were also unsettled by a report Thursday that showed signs of weakness in U. S. manufacturing. The Dow Jones Industrial Average tumbled 660.02 points or 2.8% to 22,686.22, the Nasdaq plunged 202.43 points or 3% to 6,463.50 and the S&P 500 slumped 62.14 points or 2.5% to 2,447.89.
Crude oil prices edged higher. U. S. crude rose 0.6% to $46.84 a barrel in New York and Brent crude rose 0.7% to $55.33 a barrel in London. Oil prices have nosedived almost 40% since early October, and investors' fears about falling demand in China and elsewhere were a key reason for the decline.
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