DCE rises despite poor PMIs

Chinese futures rebounded despite poor economic indicators for China as some participants expected Beijing policymakers to step up stimulus policies. The most-actively traded iron ore futures for September 2020 delivery on the Dalian Commodity Exchange (DCE) increased by 2.52% day-on-day to RMB 610 per tonne on Thursday. Similarly, the steel rebar contract on the Shanghai Futures Exchange also rose by 2.12% to RMB 3,367 per tonne.   Lower China’s PMIs China’s Caixin/Markit manufacturing PMI slipped by 49.4 ratings on April, lower than market expectation of 50.3 reading for the month. The sub-50 reading implied that the China’s economy had been in contractionary mode, impacted the effect of the coronavirus pandemic. Market sources stated that the low reading of April reflected market sentiments that the economic shock brought by the pandemic may be longer than previously thought. Thus, April’s reading was a much lower than the 50.1 reading recorded in March, and worse than China’s official factory PMI rating at 50.8.   More stimulus packages on National People’s Congress After delaying for almost two months, Beijing policymakers decided to hold their National People’s Congress in 22 May. Some market participants expected the Chinese government to introduce some stimulus or step up in their effort to offset the negative economic impact brought by the coronavirus pandemic. The setup of the meeting at late May also suggested that the coronavirus outbreak had been brought under control in the country, as well as the gradual resumption of work activities across provinces.