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Chinese manufacturing activity rises boosting miners on FTSE

Article By: ,  Financial Analyst
June 2, 2014 2:15 PM

A rise in Chinese manufacturing activity has boosted the FTSE 100 this morning (June 2nd), with miners getting the index off to a good start for the new week.

Official data from China showed factory activity last month grew at the quickest pace so far this year, with miners such as Anglo American seeing their share prices rise as a result.

The official purchasing managers index (PMI) in China rose to 50.8 in May, which is up from 50.4 in April. With any reading above the 50 mark denoting growth, this may be an indication the rumoured Chinese economic slowdown is not going to materialise after all.

A recent PMI survey by HSBC provided a preliminary reading for May of 49.7, which was also a five-month high for the index. The official reading was higher than had been anticipated too.

"The improvement of both PMIs suggest that economic activities have stabilised somewhat due to the recent pro-growth policies," said ANZ bank.

Slowdown worries

Wang Tao at UBS in Hong Kong added that the Chinese government has become increasingly concerned about an economic slowdown and has therefore announced a range of methods designed to increase growth.

He added: "Policy support will strengthen as the economy weakens further, so as to the defend the growth target for 2014."

The Chinese government recently announced that it would cut the reserve requirements for banks in what represents a bid to stimulate lending to certain sectors. Tax breaks for small and medium-sized companies have also been announced by the state in China in recent months, as well as a major investment in railway infrastructure.

Following the announcement of the improved factory output in China during the month of May, shares in mining firm Anglo American rose by 1.65 per cent on the FTSE 100. This in turn contributed to a boost for the index overall, which was up by 0.33 per cent at 11:25 BST today (June 2nd) to get the new week off to a good start.

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