Hope Glimmers for Economy as China’s Manufacturing Stabilises and Syria Strike is Delayed

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By Sunny Peter | September 3, 2013 2:28 PM EST

Reports of a strong manufacturing sector emanating from China lifted market spirits and held out some hope for the Australian and New Zealand currency on Monday. China is a key export market for both Australia and New Zealand which has helped sustain both the economies in recent times of turmoil. Along with the upbeat news from China was U.S. President Barack Obama's decision to seek congressional approval for possible action against Syria. It faded worries about the looming military action against the Assad regime and helped sustain riskier assets.

Showing signs of some revival, the final Chinese HSBC/Markit Purchasing Managers' Index (PMI) climbed up to 50.1 last month, rising up from July's 47.7. Reuters said, this showed the first signs of expansion in the last four months.

Earlier the official manufacturing PMI had suggested that factory activity, in August, grew at its fastest pace in more than a year. Experts believe these are signs of economic stabilisation in China.

The Australian dollar got further spur as national data showed that building approval has grown 10.8% in July. This was more than twice the increase forecasted. August saw home prices in Australia increase for the third straight month.

Both the good news - of Chinese economic stabilisation and burgeoning building approvals - enabled the Australian dollar to find some movement upwards.

However, it needs to be seen how long China's factory sector will continue to show signs of Monday's growth. Importantly, other Asian economies continue to reel under the impact of recent selloff in emerging-market assets.

The Wall Street Journal, on Monday said that, investors anticipating higher U.S. interest rates lead to the reversal of capital flows from emerging markets, which in turn, hammered the economies of nations like India and Indonesia that rely heavily on foreign investment.

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