China's June PMI data were just out: the rolling 3 month combined reading (shown in the chart below) was virtually unchanged, and it continues a pattern of tightly ranging figures after topping out last year. Copper prices have been following a similar path to the Chinese PMIs, and have likewise been range-bound. The next steps for both the China business surveys and the copper price could well be down. The main rationale behind my view here is: transition of stimulus indicators from big tailwind to now a slight headwind, the previous strengthening of the Renminbi which will act as a headwind to exports (although my view is the USDCNY will head towards 7), the US tariffs, and a tapering-off in the property market. The only question on the slowdown scenario for China in my mind is where the pain point is - when will the authorities make a more decisive move on stimulus. We've already seen some minor steps towards stimulus, but we probably need to see more softening in the data before they go all-in again.
Looking for deeper insights? Try taking a free trial of our institutional research service