31st January Marks the Release of Key U.S. & Chinese Data Points for the Base Metal Market
The 31st of January will mark an important date in the diary for this week, with release not only of China’s first scheduled major economic reading of 2024 (PMIs), but the end of the U.S. Federal Reserve’s first FOMC meeting of the year. Individually these two events have the potential to mould expectations for what to expect in the near-term for the base metal markets.
China’s PMI Readings
The Purchaser Managers’ Index (PMI) readings in China mark not only the first release of a major economic data point over each month of the year for the country, but have historically been a barometer for what to expect from other key economic readings over the following 30 days, and therefore it captures market attention.
What Do We Expect?
Market Forecasts for January PMI Readings

Source: Bloomberg
State Produced PMIs
The market is calling for the January manufacturing PMI reading to moderately reduce its pace of declines, after falling to its weakest level since June 2023. Here, activity is set to improve ahead of the Lunar New Year Holiday (9th-16th February), given that the markets will be closed over the period. Meanwhile, services are forecast to tick higher on the back of increased travel.
Caixin Produced PMI
The independent smaller-to-medium sized business focused and export-led Caixin reading is set to post more robust evaluations than the state-produced PMIs, with manufacturing set to remain steady in growth of 50.8 for a second month, with modest gain in services. Please note, the Caixin manufacturing reading has held in expansionary territory since July.
In our View - We Forecast a Muted Start to the Year
We forecast only a modest improvement in PMI readings for January, with manufacturing the focus, being unable to sustain gains in activity over 2023 or likely Q1 this year, especially given the slowdown in the industrial sector over the Lunar New Year holiday. Meanwhile, we foresee that external demand will remain weak, with regions like Europe and Japan lingering within manufacturing recessions. Furthermore, looking at exports out of South Korea (which is a marker for global export health), exports have fallen 1% Y/Y in the first 20 days of 2024, versus a 5% Y/Y uptick in December.
Manufacturing PMIs

Non-Manufacturing PMI

Meanwhile, Could Chinese Infrastructure Investment Be at a Turning Point?
The only bright spot on the horizon appears to be stemming from construction, with the December state-produced PMI reading posting its highest level of activity since May 2023. In addition to this, Fixed-Asset Investment (FAI) recorded its first M/M gain of 2023 in December, suggesting that perhaps targeted stimulus (such as the surprise issuance of 1Tr yuan ($139Bn) of sovereign debt in early-October), is starting to trickle through. In addition to this, moves over the last week from the Government and PBoC are set to further support investment.
Support Measures Announced in China

Key Chinese Economic Readings December Versus November 2023
The Property Market Will Remain the Key Headwind for China in 2024
On the morning of 29th January, Evergrande Group (the world’s largest indebted property-developer) was issued a liquidation order by Hong Kong’s Judge Linda Chan. Now while Hong Kong’s courts have issued at least three liquidations orders for other Chinese developers since 2021, Evergrande stands alone with respect to the level of complexity, numbers of stakeholders and indeed asset size. A key issue ahead will be whether the insolvency proceedings gain recognition in mainland China; however, regardless of this, the ruling alone will only add to the weak sentiment for this sector moving ahead, which makes up ~25% of Chinese GDP. Please note, the property markets have faced a dismal start to 2024, with market data suggesting that new home sales in 30 major Chinese cities fell 38% in the first three weeks of January versus the same period last month.
Key Chinese Economic Readings 2023 Versus 2022

Home Prices
Residential Home Sales
January U.S. Federal Reserve Meeting to Conclude on 31st January – Rates to Hold Steady
Market expectations over the timing for the first rate cut this year have been varied, with hard and soft economic data painting moderately different pictures over the health of the economy in recent weeks (please see our Base Metal Weekly Call Slides here). As it stands, the bond market is pricing in just a 2% chance of a rate cut in January, while expectations for March stand at 50%. Given the uncertainty, official comments (particularly from Chairman Powell’s speech and Q&A session post-FOMC meeting) will be vital to better project what to expect in the months ahead.
Inflation Has Been Tracking towards 2% Target
Implied Overnight Rates

Please find the below links to our most recent Base Metal Weekly Macro Call Slides, which delve into the details of economic reading releases each week.
Base Metal Weekly Macro Call - 10th January 2024
Base Metal Weekly Macro Call - 17th January 2024
Base Metal Weekly Macro Call - 25th January 2024



