Profits of Chinese manufacturing companies rose for the fourth month in a row, according to government figures released over the weekend. In August alone, they jumped 19.1% year over year, as the world’s second-largest economy continues to recover from the shock of the Covid-19 pandemic.
This means that industrial profits so far this year are only 4.4% lower than in January-August 2019 – quite a recovery, given the turmoil in the global economy.
Raw materials producers, OEMs and power makers all posted particularly strong profit increases
The numbers suggest that China’s recovery has gathered pace over the summer, as Beijing’s stimulus efforts come into play.
This is a welcome sign for the markets, amid fears that the European recovery will run out of steam over the next three months with the increase in Covid-19 cases.
Stephen Innes of AXIcorp explains:
Profits of major Chinese industrial companies remained on track for a steady recovery in August. Indeed, robust profits from China’s colossal production and operating engines have provided further evidence of a strong economic recovery.
The data bodes well for China’s growth story and the outlook for commodity prices.
So, after losing ground last week, European stock markets are expected to rebound this morning. The United Kingdom FTSE 100 is expected to gain more than 1%, after flirting with a four-month low on Friday.
Asia-Pacific indices have already registered gains, Japan Nikkei up 1%, in China CSI 300 up 0.6% and in South Korea KOSPI up 1.3%.
Also coming today
Christine Lagarde, President of the European Central Bank, testifies today to MEPs on the economy of the euro zone. She could face questions about the strength of the euro, Europe’s hesitant recovery and the prospect of another ECB stimulus package soon.
- 2:45 p.m. BST: Christine Lagarde, Director of the ECB, testifies before the ECON Committee of the European Parliament