The Caixin/S&P Manufacturing PMI from China is set to be released today, following disappointing official PMI results for July. The July Caixin Manufacturing PMI is expected to remain in the growth zone, but it may be slightly lower than June’s figure. There are key differences between China’s National Bureau of Statistics (NBS) PMI and the Caixin/S&P Global PMI. The NBS PMI is compiled by a government agency, while the Caixin PMI is created by Caixin Media in collaboration with S&P Global, a private enterprise. The NBS focuses on large state-owned companies in both manufacturing and non-manufacturing sectors, while Caixin targets small to medium-sized private enterprises (SMEs).

Comparison Of NBS And Caixin PMIs

The NBS PMI surveys about 3,000 companies, mainly state-owned, and is published at the end of each month. In contrast, the Caixin PMI, which surveys around 500 export-focused firms, is released a few days later on the first business day of the next month. The NBS PMI reflects broader economic conditions, especially in government-driven sectors, while the Caixin PMI gives insight into the health of the private sector. Generally, NBS results show less volatility, while Caixin data reflects real-time market dynamics. Both PMIs provide valuable insights into different aspects of China’s economy. Yesterday, the official NBS Manufacturing PMI for July came in at a disappointing 49.2, indicating a drop into contraction and signaling weakness in large, state-owned firms. This result has already put pressure on markets that rely on Chinese demand. Today’s focus will be entirely on the private survey data. Now, attention shifts to the Caixin Manufacturing PMI, which gives us insight into the health of smaller, agile private companies. The market is predicting a reading of 51.4. If it falls significantly short, this could confirm that the economic slowdown is widespread. A weak result would heighten concerns that the earlier recovery in 2025 is losing steam. Industrial metals have already reacted, with copper prices dropping to around $9,550 per metric ton on the London Metal Exchange. In past instances of economic slowdowns, such as in late 2023, weak PMI readings often led to sharp declines in commodity prices. Traders might consider buying put options on copper futures or related ETFs to prepare for further weakness.

Effects On Global Markets

The Australian dollar, a key indicator of China’s economic health, has also fallen to about 0.6680 against the US dollar this week. A low Caixin reading could push the currency closer to the year-to-date lows we saw in May. Using derivatives, traders can purchase AUD/USD put options, which provides a defined-risk strategy to prepare for a further decline. This gap between the negative official data and the more optimistic private forecast is creating uncertainty. Implied volatility on China-focused ETFs like MCHI has increased in recent sessions. Traders anticipating a significant move in either direction after today’s release might consider using long straddle strategies to take advantage of a rise in volatility. Create your live VT Markets account and start trading now.

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