A reading above 50 indicates expansion from the previous month, while a reading below 50 indicates contraction.
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The weakness among Chinese stocks came as a report from Markit and Caixin showed that manufacturing activity in China slid to a six-year low in August.
“But overall, the likelihood of a systemic risk remains under control and the structure of the economy is still improving”, the report said.
In France, the manufacturing PMI dipped further into contractionary territory-falling to 48.6 in August from 49.6 in July-and the data pointed to firms cutting jobs.
Commerzbank, Capital Economics, and ING, to name a few, acknowledged the positive surprise but were reluctant to suggest it was anything more than just temporary relief from a generally-weakening outlook for global growth.
Friday’s reading was the lowest since March 2009, during the depths of the global financial crisis, and the sixth consecutive below the 50-point level. Wall Street was expected to open firmly in red again later having already lost more than 2.5 percent this week.
The flash index is published on a monthly basis ahead of final PMI data, making it the earliest available indicator of manufacturing conditions in China.
The discounting helped a PMI covering the bloc’s dominant service industry rise to 54.3 from 54.0, while a sister index covering manufacturers held steady at last month’s 52.4. “Rather, it is the pace of the slowdown in domestic demand that is more worrying and points to the underlying challenges facing the manufacturing sector”, HSBC economists Julia Wang and Jing Li said in a research note. However speculation earlier this week that the authorities might rein in their market-boosting measures, which included the massive buying of shares by government-linked companies, added to anxieties.
Economists had estimated a Purchasing Manager’s Index flash reading of 53.8 in August, unchanged from the prior period.
Closer to home, the Markit Flash U.S. Manufacturing PMI decreased from 53.8 to 52.9, the slowest pace of growth since October 2013.
“According to survey respondents, the strong dollar continued to put pressure on export sales and competitiveness, while heightened global economic uncertainty appeared to have dampened client spending both at home and overseas”.
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A looming snap election in Greece and a closely watched conference hosted by the Federal Reserve in the United States are also likely to keep investors on their toes next week, in particular as they look for hints on when the U.S. will raise interest rates.
