Manufacturing activity amongst small and medium sized Chinese firms contracted unexpectedly in December with the flash PMI gauge from HSBC-Markit falling to 49.5. The reading, below the 50 level of November and expectations for a similar figure for December, was the lowest level seen since May.
Looking at the survey sub-sectors output rose to 49.7, a marginal improvement on the 49.6 level of November but still in contractionary territory. Employment continued to decline, albeit at a slower pace, while output and input prices fell at a faster pace, something that will no doubt provide fuel to those calling for increased stimulus given slowing inflationary pressures. As for the outlook for activity the signals were mixed with domestic orders contracting while new exports orders and order backlogs expanded at a faster pace.
While below market expectations both the AUDUSD and ASX 200 lifted off lows following the release, a sure sign that markets are yet again betting on increased stimulus measures.