China’s weak factory reports show need for lasting trade truce

Bloomberg

A gauge of activity in China’s manufacturing sector showed the economy remains fragile, underlining the need for the truce with the US forged at the weekend to be a lasting one.
China’s manufacturing purchasing managers’ index stayed at 49.4, according to official data. That’s worse than the 49.5 forecast in a Bloomberg
survey of economists, and still signals deterioration.
A sub-index gauging new export orders edged down further, highlighting the impact of previous tariffs. A reading below 50 signals contraction.
The weak result indicates that the recovery in the first half waned further, ahead of the truce reached in Osaka between the US and China that prevents further tariff increases for now.
Similar manufacturing reports for the US and the euro area due on Monday were expected to show further
reasons to worry about the global economy, which has suffered from
the tariff uncertainty and a cyclical slowdown.
“The G-20 sent a slightly positive message, but that optimism has been hedged by the worsening economic data from China,” said Hao Zhou, senior emerging markets economist at Commerzbank AG. “A global economic slowdown is going to hurt both the US and China. At the moment, keeping the truce in place is probably the easiest solution for both sides.”
After a high-stakes meeting with Chinese President Xi Jinping, Donald Trump said that he would hold off imposing higher tariffs on $300 billion
of imports from China and the world’s two largest economies agreed to
resume negotiations.
More manufacturing data from China, including the Caixin manufacturing PMI expected to be released on Monday, will offer additional insight on how the economy has fared in June.
Readings from the major economies all flashed warning signs — a preliminary gauge from the US fell to the lowest since last 2009 in June, that of the euro zone remained in contraction, while the gauge for Japan also indicated deterioration.