More evidence of a growth bottom in China gets stock markets all excited

11/01/2012 3:05 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Yet more data today signaling that China hit a growth bottom in September.

Today it’s the official Purchasing Managers Index from the National Bureau of Statistic showing an expanding economy with a reading of 50.2 in October, up from 49.8 in September. In this survey anything above 50 indicates an expanding economy.

China’s economy expanded at a 7.4% annual rate in the third quarter, the slowest rate in three years, but month-by-month data showed September picking up strength after a weak August. This week Bank of America raised its estimate for China’s fourth-quarter GDP growth to 7.8% from 7.5% and Nomura Holdings projected a rebound to 8.4%.

It’s always good to put on your cynics hat when looking at China’s economic data. And with the National Party Congress set to install new leadership next week, skepticism is certainly in order.

But other Asian economies with close links to China’s economy are also reporting numbers that show improving growth. The Purchasing Managers Index for Taiwan, for example, rose to its highest level since June.  Korea’s PMI, which had dipped in September, climbed in October.

In the United States the Institute for Supply Management’s Purchasing Managers Index for the manufacturing sector climbed to 51.7 in October, marking a second consecutive monthly increase. The index had tumbled in each month from June through August.

Not surprisingly the Shanghai Composite Index rose in overnight trading by 1.72%. Hong Kong’s Hang Seng Index climbed 0.83%.

That economic and stock market news out of China has spilled over into trading in commodities sectors such as coal, copper, and iron ore. (Faster growth in China means higher demand for commodities.)  Coal-miner Peabody Energy (BTU) is up 5% today as of 2:40 p.m. New York time. Freeport McMoRan Copper & Gold is up 3.4%. Brazilian iron-ore miner Vale (VALE) is up 2.6%.

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