TD Securities' analysts note that the details of China’s manufacturing PMI were soft as the overall PMI came in at 49.4 in June, the same as the month earlier.

“The breakdown revealed a decline in manufacturing output, new orders, employment, supplier delivery times, output prices, purchases of inputs, new export orders, imports and expected production. Only stocks of inputs and input prices rose but remained below 50. Large enterprise sentiment dropped back below 50 but there were gains in small and medium-sized enterprises, albeit remaining below 50.”

China’s Caixin PMI was weaker than expected at 49.4 in June (market 50.1). The details revealed a weakening in output to 49 from 50.1 in May, the lowest reading since January 2019.

New orders also fell compared to the previous month, recording the lowest reading since January. This taken together with the continued contraction in the manufacturing PMI will cast a shadow over the positive weekend developments, and may limit the rally in risk assets.”