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China March factory growth stronger than expected, official PMI shows

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Growth in China’s manufacturing sector picked up more than expected in March as authorities lifted winter pollution restrictions and steel mills cranked up production as construction activity swings back into high gear.

The official Purchasing Managers’ Index (PMI) released on Saturday rose to 51.5 in March, from 50.3 in February, and was well above the 50-point mark that separates growth from contraction on a monthly basis.

Analysts surveyed by Reuters had forecast the reading would pick up only slightly to 50.5.

The findings add to a growing amount of data which suggest that China’s economy has carried more momentum into the first quarter from last year than analysts had expected, which should keep synchronized global growth on track for a while longer even as trade tensions build.

February’s print had been the lowest in 1-1/2 years, but many analysts suspected it was due to disruptions related to the long Lunar New Year holidays, not a sharp drop in consumption.

Indeed, the March survey showed manufacturers shifted into higher gear as usual as seasonal demand picked up at home and abroad. The sub-index for output jumped to 53.1 from 50.3 in February, while total new orders rose to 53.3 from 51.0 and export orders climbed to 51.3 from 49.0.

The China Logistics Information Centre, in a commentary on the PMI figures, said it expected first-quarter economic growth to be about 6.8 percent. Early this year, economists polled by Reuters were pencilling in a fade to around 6.6 percent.

Large companies saw a modest pickup in growth, while small firms’ activity expanded marginally after shrinking in February.

Helping drive positive sentiment, exports have been better than expected in the first two months of the year, particularly for tech products, the fastest-growing segment of China’s industrial sector. Though a sub PMI for hi-tech manufacturing eased in March, growth remained solid.

However, a sharp escalation in trade tensions with the United States is clouding the outlook for both China’s “old economy” heavy industries and “new economy” tech firms.

The Trump administration slapped hefty tariffs on steel and aluminium imports last week and then targeted China specifically with plans for additional tariffs of up to $60 billion of its goods, likely focusing on tech and telecommunications products.

“Stress tests have shown the new U.S. tariffs will have a relatively small impact on Chinese steel. Chinese steel firms should not be overly worried and should focus on guaranteeing demand from the domestic market and our major exporters,” the China Steel Logistics Professional Committee said.

“But it’s worth noting that the amount of steel products we supply to U.S. consumers through the global supply chain may well exceed China’s direct exports to the United States,” it added. “China should proactively oppose U.S. unilateral trade protectionism to maintain the global supply chain.”

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Germany has limited its coronavirus death toll but faces criticism

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Doctors in Berlin, Germany.

Sean Gallup | Getty Images News | Getty Images

Germany has been praised for its tackling of the coronavirus pandemic, having managed to keep deaths under 10,000 while its European neighbors have seen much higher fatalities. 

But the chief executive of German health-care group Fresenius has warned that the country may have been overly focused on the pandemic, ignoring other areas of business and society that have suffered.

“Even though a lot has been done in the right way, my criticism is that we have focused too exclusively on the coronavirus and we have ignored all the collateral damage that has been going on and continues to go on,” Fresenius CEO Stephan Sturm told CNBC on Wednesday.

The damage was evident in the health sector, he said, “with all the cancer, heart attack and stroke cases not being treated the way they should be. But also in society, we’re seeing lost school years and many many children in precarious situations and suffering from what is going on with us focusing exclusively on Covid,” he said.

As the coronavirus crisis surged in Europe, companies like Fresenius, which has a hospital-operating unit Helios, were forced to delay and cancel elective surgeries. The German government offered fixed compensation to hospitals for procedures they have been forced to cancel. 

Sturm said compensation had helped. He also insisted his concerns surrounding the focus on the coronavirus was not due to commercial interests, but from being a “responsible citizen.”

“The German government has been good enough to make available a compensation package that makes us half-way home for the fixed-cost charge that is ongoing. But yes, the fixed-cost charge is hurting us, given that we were basically prohibited from treating elective-surgery patients. There, from the trough in March-April, we’re seeing a steady, gradual recovery.”

Germany has recorded 278,515 infections, according to data compiled by Johns Hopkins University. It’s current death toll of 9,421 is far lower than its European counterparts.

Nonetheless, data from the Robert Koch Institute shows that cases are rising, particularly in the cities of Munich and Hamburg. On Wednesday, a further 1,769 cases were reported after 1,821 new infections were registered Tuesday. German Chancellor Angela Merkel has called for a crisis summit next week with regional governors, German media reported Monday.

Despite the “better” data, Fresenius published a study on the pandemic’s impact on Germany in August in which it said the clinical course of the virus in the country was as bad as in other countries. 

“Two of every three Covid-19 patents in intensive care in Germany require mechanical ventilation. One-third of ventilated intensive care patients die, compared with one-quarter of non-ventilated intensive care patients,” according to the study, which had collected and analyzed data on Covid-19 patents treated in 86 German hospitals run by Helios since the start of the pandemic in February.

“This shows that the clinical course of Covid-19 patients in Germany is as poor as in countries hit harder by the pandemic such as Italy, France, the United Kingdom and Belgium,” the study said.

Fresenius’ CEO told CNBC that he believes Germany had seen a lower death toll for several reasons. “A) We had a good hospital infrastructure to start with and B) we were relatively late [to see cases] and we could take some good lessons from other countries. and C) I think social distancing is a good part of the German culture and therefore we had much better prerequisites to deal with this.” 

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Dow futures jump 200 points continuing rebound from September sell-off; Nike shares rise

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U.S. stock futures were solidly higher again early Wednesday after the S&P 500 experienced its first positive day in five trading sessions. Dow Jones Industrial Average futures received a boost from a blowout earnings report from component Nike.

Dow futures rose 201 points, or 0.7%. The move pointed to a gain of more than 150 points at the open. S&P 500 futures added 0.4%. Nasdaq-100 futures gained 0.4%. 

Here’s what traders were watching:

  • Nike’s stock jumped 13% in premarket trading as the company said digital sales surged more than 80% last quarter. Earnings and sales blew past analysts expectations last quarter and the company gave a forecast for growth in the new fiscal year.
  • Airlines and cruise lines gained in premarket trading after President Donald Trump said the U.S. would not be implementing a second round of lockdowns as the U.K. began imposing stricter measures. “The U.K. just shut down again. They just announced that they’re going to do a shutdown, and we’re not going to be doing that,” Trump said. United Airlines and Delta were up more than 2%. Carnival gained 2.7%.
  • Johnson & Johnson started a phase 3 trial of its coronavirus vaccine.
  • The House passed a bill avoiding a government shutdown.
  • Key tech stocks Amazon, Apple and Microsoft were slightly higher in premarket trading. Tech stocks have been the center of the September sell-off.
  • Shares of Tesla fell 4% in premarket trading after Elon Musk offered new delivery predictions for 2020 and detailed a new battery design that it claims will make its cars cheaper to produce.

On Tuesday, the major averages snapped multi-day losing streaks, all closing in the green. The Dow Jones Industrial Average climbed 140 points and the S&P 500 climbed 1.1%. The technology-heavy Nasdaq Composite was the relative outperformer, popping 1.7% as Amazon surged 5.7%. 

“As soon as the S&P 500 reached the official correction zone near a 10% decline… ‘dip buyers’ emerged and have been evident ever since,” Jim Paulsen, chief investment strategist at The Leuthold Group, told CNBC. “These buyers, armed with cash holdings, may be driven less by the ‘fear of missing out’ than they are by the ‘opportunity to finally get in.'”

Shares of megacap technology stocks — which have suffered in September — all closed in positive territory on Tuesday. 

“Optimism broadened as the day progressed lifting not only technology and communications stocks for the second day, but ending with eight of the 11 sectors within the S&P 500 Index in the green,” added Paulsen. 

Stock gains were capped by concerns about an uptick in coronavirus cases in the U.K. paired with bleaker outlook for a second stimulus bill from the United States Congress. U.K. Prime Minister Boris Johnson announced Tuesday a tightening of economic restrictions and public health measures to slow the spread of Covid-19. Johnson said that the country was at a “perilous turning point.” 

U.S. coronavirus deaths topped 200,000 on Tuesday, according to data compiled by Johns Hopkins University.

With stimulus plans at a stalemate in Washington, Federal Reserve Chairman Jerome Powell on Tuesday reiterated to lawmakers that the U.S. economy could begin to decelerate in the months ahead without further fiscal stimulus from Congress. Powell told the House Financial Services Committee that many economic forecasts underlies fiscal action. Powell also reassured investors that the central bank will support the economy “for as long as it takes.”

Powell will testify again on Wednesday to Congress’s Select Subcommittee on the Coronavirus Crisis. 

September continues to be a weak month for stocks with all three averages posting three straight weeks of losses. The Dow is down more than 4% in September and the S&P 500 and Nasdaq Composite have lost 5.3% and 6.9% this month, respectively. 

“We think equities will move higher over the medium term, thanks to the likely development of a successful vaccine, an end to election uncertainty, the passage of new US fiscal stimulus, and continued extraordinary global monetary support,” said Mark Haefele, UBS Global Wealth Management chief investment officer. “However, the path to ‘more normal’ is likely to be bumpy amid uncertainty over the coronavirus, the U.S. political environment, and U.S.-China tensions. We therefore expect volatility to persist over the balance of the year.”

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Airlines aren’t raising prices amid Covid-19 pandemic

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