China’s factory activity is expected to have continued to grow in February, a Reuters poll showed on Monday, suggesting that the flashes of domestic demand seen since the zero-COVID policy ended are now strong enough to rekindle upstream sectors, Reuters reported.
Domestic orders and consumption drove output higher and saw economic activity in the world’s second-largest economy swing back to growth in January, and economists expect manufacturers to have consolidated that position now that the country’s COVID-19 epidemic has “basically” ended.
The official manufacturing purchasing managers’ index (PMI) is expected to have improved to 50.5 in February, compared with 50.1 in January, according to the median forecast of 29 economists in a Reuters poll.
Short-Term Outlook
We’re bullish on crude oil because of the Russian output cuts and China’s improving recovery. But we also acknowledge that the market is facing some serious headwinds with the Fed likely to raise rates 25-basis points rate in March, May and June, respectively. This is expected to keep the U.S. Dollar unpinned while bringing the economy closer to recession.
Like the Fed, commodity markets are going to be data dependent until the Fed signals a pause in rate hikes. So we’re expecting to continue to see volatility as the Fed moves to tame inflation by possibly driving the economy into recession.
Traders will also be looking to the latest U.S. oil stocks data due from the American Petroleum Institute (API) industry group on Tuesday and the government’s Energy Information Administration on Wednesday for further demand indicators.
