What’s going on here? China’s depleted manufacturing and services sectors fell short of the magic number. What does this mean? China’s official manufacturing purchasing managers’ index tracks the country’s factory activity levels. In June, that measure came in at 49.5 – below the 50 mark that signals expansion, and the same as May’s figure. See, while a sub-index that tracks production rates did eke out a win of slightly above 50, plenty of other indexes came in below that all-important number and dragged the average down. They included new orders, raw material stocks, employment, supplier delivery times, and new export orders. Why should I care? Zooming out: Patience can be a virtue… or a vice. China’s long-awaited recovery is keeping investors twiddling their thumbs. Measures of non-manufacturing activity in construction and services dipped to 50.5 in June from May’s 51.1 – the lowest since December. That’s threatening China’s target of 5% economic growth this year. And potential tariffs from the US and Europe – two of the country’s biggest customers – aren’t helping either. Investors are eagerly awaiting China’s Third Plenum later this month, where major policy shake-ups could be revealed. For now, though, they’re cautious: the MSCI China index picked up by 23% between January and early June – but since then, it’s been losing ground. The bigger picture: America has a distraction. The US economy is showing cracks too, but it can rely on tech giants to push up the stock market. That much was clear in “equal-weighted stock benchmarks”: while the S&P 500 index gives more weight to the Magnificent Seven, these benchmarks give disruptive tech as much space as industrial bellwethers. And last month, they fell even further behind. So with stateside companies’ balance sheets shaken up by higher interest rates, you can see why Citigroup’s US Economic Surprise Index – a measure of how economic data is living up to expectations – hit its lowest point since August 2022. | 
