China’s factory activity falls first time in 2 years affecting markets

China’s factory activity contracted in December below the critical 50-point level that separates growth from contraction, according to data released by the National Bureau of Statistics on Monday.

The contraction was the first since 2016 and the weakest PMI reading since February 2016. Analysts had expected it to fall to 49.9 in December.

Analysts say this indicates a significant strain on factories, which signals continued loss of economic momentum, putting risk on China’s economy.

Analysts have also shown concern over US and China relations and trade tensions. This comes after US president Donald Trump and Chinese president Xi Jinping agreed to a 90-day ceasefire, putting a hold on US increase of tariffs on $200 billion worth of Chinese goods.

However, uncertainty remains whether China and the United States can work out their differences during the temporary ceasefire.

Markets react to weak data and possible trade war truce

The foreign exchange market has reacted to the weak China data, showing the AUD/USD down slightly trading to 0.7050 on Monday upon the data’s release.

The USD/SGD rose slightly upon the data, sitting at 1.3681 upon writing on Monday.

USD/IDR flops to 14480, while USD/IDR, ranging between 14440 to 14590 upon data.

A tweet from US President Donald Trump on Sunday about trade talks between US and China had also played into the asian market’s reaction.

Singaporean and Malaysian stocks also rose on Monday in hopes of an end to the trade war.

Singapore's index rose 0.3 % on Monday, while Malaysia's benchmark was boosted by industrial conglomerate Sime Darby Berhad, which rose 3.4 %.

Singapore's index has shed over 10%, while Malaysian stocks were among the region's better performers with a 5% decline.