It is a new year, but likely a familiar feeling for many as investors and executives around the world contemplate the impending start of another term in the White House for Donald Trump.
Chinese factory data published today suggests that the prospect of a renewed trade war will cause harm. Factory activity in the world’s second-largest economy continued to expand during December, according to data company Caixin’s purchasing managers’ index. However, the index, at 50.5 points, came in lower than the 51.7 expected by economists polled by Reuters.
The weak manufacturing data appeared to contribute to a sell-off on Chinese stock markets. The Shanghai stock exchange composite index dropped by 2.7% on Thursday, while Hong Kong’s Hang Seng index fell by 2.1%. Japan’s Nikkei also fell by 1%.
China’s yuan also hit its lowest in more than a year against the US dollar in offshore trading. The yuan fell to a 14-month low of 7.31 for every dollar.
The trade outlook played a role in the drop in the manufacturing PMI. Business confidence dropped to the lowest since September amid “concerns about the outlooks for growth and trade, especially amid the US tariffs threat”, according to Caixin.
Wang Zhe, a senior economist at Caixin Insight Group, said: "Exports dragged on demand amid mounting uncertainties stemming from the overseas economic environment and global trade. The corresponding indicator was in contractionary territory for the fourth time in the past five months.
"Business optimism weakened. Concerns among surveyed companies focused on the economic recovery outlook and the trade conflict between China and the US. Future output expectations continued to grow, but the gauge dropped by more than three points from November."
Meanwhile, the Financial Times’s annual survey of economists around the world has also flagged concerns that Trump’s protectionism will dent growth. The survey of 220 economists found that the president-elect’s policies are expected to slow growth and spur inflation.
The agenda • 9am GMT: eurozone manufacturing purchasing managers’ index (December final reading; previous: 45.2 points; consensus: 45.2 points) • 9.30am GMT: UK manufacturing PMI (December final reading; previous 48; consensus 47.3) • 1.30pm GMT: US initial jobless claims (week ending 28 December; previous 219,000; consensus 224,000) • 2.45pm GMT: US manufacturing PMI (December final reading; previous 49.7; consensus: 48.3)
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