Forex News – China’s manufacturing expansion helps support market sentiment

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The HSBC flash manufacturing index showed that new orders and export orders in China rebounded in October.

The Index rose above 50-point mark for first time since June suggesting that manufacturing in the world’s second-largest economy expanded, through moderately, in October after three straight months of contraction.

This will likely soothe fears of an abrupt slowdown in the world’s second-largest economy. The rise in the manufacturing index also will help ease fears that China’s economy is heading for a hard landing, one of the major concerns for global investors along with the euro zone crisis and the slowdown in the United States.

PMI rose to 51.1 in October from September’s final reading of 49.9. The last time the index was above 50 in June, the index gave a reading of 51.6.

“Thanks to the pick-up in new orders and output, the headline flash PMI rebounded back into expansionary territory during October, marking a steady start to manufacturing activities in the four quarter,” said Qu Hongbin, China economist at HSBC.

“Meanwhile, inflation components within the PMI results confirmed stable output prices growth and slower input price inflation. All these data confirm our view that there is no risk of a hard landing in China,” he said.

The PMI data provided support to financial markets especially during the Asian trading session. The news will probably also keep euro supported in addition to hopes that euro zone leaders were moving closer to stemming the debt crisis.