China's December's service sector Purchasing Managers Index from 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. Still, overall the series has done little to dent market suspicions that China's economy softened considerably in the second half of 2018.
Market sentiments remain subdued, as concerns towards the U.S. and Chinese economies have increased in the wake of weak manufacturing data from these countries. Furthermore, the markets have even begun pricing in the possibility of Fed cutting interest rates. Wednesday's China Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) marked the first contraction since May 2017 and Thursday's Institute for Supply Management (ISM) data showed U.S. factory activity in December suffer the biggest drop since October 2008. Apple on Wednesday took the rare step of cutting its quarterly sales forecast, blaming slowing iPhone sales in China.
On the economic news front, Hong Kong private sector continued to contract in December, although at a slightly slower rate, the latest PMI from Nikkei showed on Friday with a score of 48.0. That's up from 47.1 in November, although it remains beneath the boom-or-bust line of 50 that separates expansion from contraction. Individually, there was a sharp decline in new order - particularly from mainland China. Business confidence remained firmly negative, while inflationary pressures continued to accelerate.
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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