Articles

• Fitch sees India budget as growth-neutral as fiscal consolidation slows
• Bitcoin dip puts Strategy marginally underwater, but balance-sheet risks remain limited
• China PMI setback underscores fragile domestic demand at start of 2026 – ING
• Japan govmt walk back Takaichi yen remarks as election nears and intervention risk lingers
• China private manufacturing PMI rises in January, but cost pressures intensify
• Australia job ads jump 4.4% in January, strengthening case for RBA hike tomorrow
• PBOC sets USD/ CNY reference rate for today at 6.9695 (vs. estimate at 6.9710)
• India budget derivatives tax hike slammed shares in special Sunday wipe out session
• Oracle to raise up to $50bn in 2026 to expand cloud infrastructure
• Japan manufacturing PMI jumps back into expansion as demand and hiring surge
• Melbourne Institute inflation gauge ticks up to 3.6% y/y, keeping RBA hike risk alive
• BoJ: Moderate recovery, inflation persistence reinforce cautious further tightening case
• Oil opens lower as OPEC+ holds March output and Iran risk premium wobbles
• Former “Mr Yen” Watanabe warns of risk of renewed yen selling backlash into Japan election
• Australia manufacturing PMI hits five-month high as growth accelerates in January
• Japan PM softens weak yen comments as election and intervention risks collide
• China Pres Xi revive push for yuan as reserve currency amid global dollar dominance debate
• China January PMI slips into contraction as weak demand clouds early-2026 growth outlook
• Monday open indicative forex prices, 02 February 2026 (ps. China January PMIs missed)
• Newsquawk Week Ahead: US PCE, BoJ, China Activity Data, Flash PMIs, Canada and Japan CPI
• Palantir, AMD, Alphabet and Amazon among the names reporting next week
• investingLive Americas market news wrap: Gold down 10%, silver falls 30%

At a glance:

• The yen weakened after PM Takaichi’s weekend comments on the benefits of a weak currency, before stabilising later in the session.

• Japan’s manufacturing PMI surprised to the upside, rising to its strongest level since 2022.

• China’s official PMIs slipped back into contraction, contrasting with firmer private PMI data and renewed yuan internationalisation rhetoric from President Xi.

• Oil prices traded heavy after OPEC+ held March output steady and offered no guidance beyond Q1.

• Asia-Pac equities were pressured by China data, Korea volatility, India’s budget shock, and tech weakness, with Japan the main outlier.

• Bitcoin continued to sell lower.

The yen came under pressure after Prime Minister Takaichi’s weekend comments that a weak currency can be a major opportunity for export industries. USD/JPY climbed to highs around 155.45 before easing back toward Friday’s closing levels near 154.80–85. Later in the session, Japan’s manufacturing PMI data arrived, rising to 51.5 in January from 50.0, marking the strongest improvement since 2022.

More broadly across FX, the US dollar was little net changed.

From China over the weekend, President Xi Jinping renewed calls for the yuan to attain a global reserve currency status, backing expanded trade settlement and alternative payment systems. At the same time, official PMI data showed both manufacturing and services activity slipping back into contraction in January, underscoring ongoing weakness in domestic demand. That contrasted with private data later in the session, as the RatingDog manufacturing PMI rose to 50.3, signalling modest expansion for a second consecutive month.

Oil prices traded on the heavy side. OPEC+ agreed to hold output policy steady for March, extending the first-quarter pause in planned production increases. The group offered no guidance beyond March, keeping optionality high amid uncertainty around Iran and the global demand outlook. President Trump said the US and Iran would hold talks, a message echoed by unnamed US officials.

The Bank of Japan’s January Summary of Opinions showed comments on a moderate economic recovery and ongoing inflation pressures, with policymakers indicating that gradual rate increases would be appropriate if current forecasts are realised.

In Australia, manufacturing PMI rose to a five-month high in January, while the Melbourne Institute Inflation Gauge increased 0.2% m/m (previously 1.0%). The annual pace edged up to 3.6% y/y, keeping inflation concerns alive as markets debate the risk of an RBA rate hike on February 3.

Asia-Pacific equities were broadly pressured amid several bearish themes, including the partial US government shutdown, the surprise contraction in China’s official PMIs, and lingering fallout from the recent historic collapse in precious metals. Sentiment was also dented by tech-related weakness following reports that Nvidia’s planned USD 100bn investment in OpenAI had stalled.

South Korea saw sharp volatility, with authorities briefly halting program trading on the KOSPI for five minutes after futures dropped 5%. The KOSPI fell 5% on the day, led by sharp losses in Samsung and SK Hynix, marking its biggest fall since November 2021.

US equity index futures fell in thin Sunday evening trade. Japan’s Nikkei was a notable exception, supported by the weaker yen and expectations of Takaichi-led fiscal stimulus.

Oracle is to raise up to US$50bn in 2026 to expand cloud infrastructure.

In India, a hike in derivatives transaction taxes announced in the budget slammed equities during a special Sunday trading session. The Nifty 50 fell about 1.96% and the Sensex dropped around 1.88%, marking the worst Budget-day performance in six years.

Bitcoin continued to lose ground.

Asia-Pac
stocks:

• Japan
  (Nikkei 225) -0.48%
• Hong
  Kong (Hang Seng) -2.4%
• Shanghai
  Composite -1.3%
• Australia
  (S&P/ASX 200) -1% (ps. Reserve Bank of Australia interest rate statement due Tuesday local time)

RBA due at 0330 GMT on Tuesday, February 3, 2026 / 2230 US Eastern time on Monday, February 2, 2026

This article was written by Eamonn Sheridan at investinglive.com.

• Fitch sees India budget as growth-neutral as fiscal consolidation slows
• Bitcoin dip puts Strategy marginally underwater, but balance-sheet risks remain limited
• China PMI setback underscores fragile domestic demand at start of 2026 – ING
• Japan govmt walk back Takaichi yen remarks as election nears and intervention risk lingers
• China private manufacturing PMI rises in January, but cost pressures intensify
• Australia job ads jump 4.4% in January, strengthening case for RBA hike tomorrow
• PBOC sets USD/ CNY reference rate for today at 6.9695 (vs. estimate at 6.9710)
• India budget derivatives tax hike slammed shares in special Sunday wipe out session
• Oracle to raise up to $50bn in 2026 to expand cloud infrastructure
• Japan manufacturing PMI jumps back into expansion as demand and hiring surge
• Melbourne Institute inflation gauge ticks up to 3.6% y/y, keeping RBA hike risk alive
• BoJ: Moderate recovery, inflation persistence reinforce cautious further tightening case
• Oil opens lower as OPEC+ holds March output and Iran risk premium wobbles
• Former “Mr Yen” Watanabe warns of risk of renewed yen selling backlash into Japan election
• Australia manufacturing PMI hits five-month high as growth accelerates in January
• Japan PM softens weak yen comments as election and intervention risks collide
• China Pres Xi revive push for yuan as reserve currency amid global dollar dominance debate
• China January PMI slips into contraction as weak demand clouds early-2026 growth outlook
• Monday open indicative forex prices, 02 February 2026 (ps. China January PMIs missed)
• Newsquawk Week Ahead: US PCE, BoJ, China Activity Data, Flash PMIs, Canada and Japan CPI
• Palantir, AMD, Alphabet and Amazon among the names reporting next week
• investingLive Americas market news wrap: Gold down 10%, silver falls 30%

At a glance:

• The yen weakened after PM Takaichi’s weekend comments on the benefits of a weak currency, before stabilising later in the session.

• Japan’s manufacturing PMI surprised to the upside, rising to its strongest level since 2022.

• China’s official PMIs slipped back into contraction, contrasting with firmer private PMI data and renewed yuan internationalisation rhetoric from President Xi.

• Oil prices traded heavy after OPEC+ held March output steady and offered no guidance beyond Q1.

• Asia-Pac equities were pressured by China data, Korea volatility, India’s budget shock, and tech weakness, with Japan the main outlier.

• Bitcoin continued to sell lower.

The yen came under pressure after Prime Minister Takaichi’s weekend comments that a weak currency can be a major opportunity for export industries. USD/JPY climbed to highs around 155.45 before easing back toward Friday’s closing levels near 154.80–85. Later in the session, Japan’s manufacturing PMI data arrived, rising to 51.5 in January from 50.0, marking the strongest improvement since 2022.

More broadly across FX, the US dollar was little net changed.

From China over the weekend, President Xi Jinping renewed calls for the yuan to attain a global reserve currency status, backing expanded trade settlement and alternative payment systems. At the same time, official PMI data showed both manufacturing and services activity slipping back into contraction in January, underscoring ongoing weakness in domestic demand. That contrasted with private data later in the session, as the RatingDog manufacturing PMI rose to 50.3, signalling modest expansion for a second consecutive month.

Oil prices traded on the heavy side. OPEC+ agreed to hold output policy steady for March, extending the first-quarter pause in planned production increases. The group offered no guidance beyond March, keeping optionality high amid uncertainty around Iran and the global demand outlook. President Trump said the US and Iran would hold talks, a message echoed by unnamed US officials.

The Bank of Japan’s January Summary of Opinions showed comments on a moderate economic recovery and ongoing inflation pressures, with policymakers indicating that gradual rate increases would be appropriate if current forecasts are realised.

In Australia, manufacturing PMI rose to a five-month high in January, while the Melbourne Institute Inflation Gauge increased 0.2% m/m (previously 1.0%). The annual pace edged up to 3.6% y/y, keeping inflation concerns alive as markets debate the risk of an RBA rate hike on February 3.

Asia-Pacific equities were broadly pressured amid several bearish themes, including the partial US government shutdown, the surprise contraction in China’s official PMIs, and lingering fallout from the recent historic collapse in precious metals. Sentiment was also dented by tech-related weakness following reports that Nvidia’s planned USD 100bn investment in OpenAI had stalled.

South Korea saw sharp volatility, with authorities briefly halting program trading on the KOSPI for five minutes after futures dropped 5%. The KOSPI fell 5% on the day, led by sharp losses in Samsung and SK Hynix, marking its biggest fall since November 2021.

US equity index futures fell in thin Sunday evening trade. Japan’s Nikkei was a notable exception, supported by the weaker yen and expectations of Takaichi-led fiscal stimulus.

Oracle is to raise up to US$50bn in 2026 to expand cloud infrastructure.

In India, a hike in derivatives transaction taxes announced in the budget slammed equities during a special Sunday trading session. The Nifty 50 fell about 1.96% and the Sensex dropped around 1.88%, marking the worst Budget-day performance in six years.

Bitcoin continued to lose ground.

Asia-Pac
stocks:

• Japan
  (Nikkei 225) -0.48%
• Hong
  Kong (Hang Seng) -2.4%
• Shanghai
  Composite -1.3%
• Australia
  (S&P/ASX 200) -1% (ps. Reserve Bank of Australia interest rate statement due Tuesday local time)

RBA due at 0330 GMT on Tuesday, February 3, 2026 / 2230 US Eastern time on Monday, February 2, 2026

This article was written by Eamonn Sheridan at investinglive.com.

Summary:

• China’s official PMI data point to persistent domestic weakness at the start of 2026, according to analysis from ING.

• The official manufacturing PMI fell back into contraction, reinforcing doubts that December marked a genuine turning point.

• Price indicators showed tentative improvement, offering some relief from deflation concerns.

• Private-sector PMI data painted a more constructive picture, highlighting the role of exports and private firms.

• Services activity also slipped into contraction, underscoring the challenge of reviving domestic demand.

China’s softer-than-expected PMI readings in January suggest that domestic economic challenges have carried over into the start of 2026, even as external demand continues to provide pockets of support, according to analysis from ING Group.

The official manufacturing purchasing managers’ index slipped back into contractionary territory at 49.3 in January, down from 50.1 in December and well below market expectations for a second month of expansion. The setback reinforces concerns that December’s improvement may have been temporary rather than the start of a sustained recovery. Manufacturing activity has now been in contraction for nine of the past ten months, highlighting the fragility of underlying demand conditions.

ING noted that the weakness was broad-based across most sub-indices. Production remained marginally in expansion but slowed notably, while new orders fell back below the 50 threshold, erasing December’s gains. Export orders also deteriorated, pointing to softer momentum even as overseas demand remains comparatively stronger than domestic consumption. Other indicators, including employment and order backlogs, edged lower, reinforcing the picture of subdued factory activity.

There were, however, some tentative positives in the price data. Measures of ex-factory prices moved into expansion for the first time in almost two years, while raw material input costs rose to their highest levels in around 20 months. ING views these developments as encouraging signs in the context of China’s long-running deflation concerns, even if they do not yet signal a broader turnaround in demand.

The official PMI also highlighted a growing divergence by firm size. Large enterprises continued to outperform, remaining in expansionary territory, while small and medium-sized firms stayed under pressure—an outcome consistent with tighter financing conditions and weaker domestic demand.

In contrast, private-sector survey data painted a more optimistic picture. The RatingDog manufacturing PMI edged higher in January, supported by gains in production, new orders and employment, alongside rising output prices. ING noted that this divergence reflects differences in survey coverage, with the private PMI skewed more toward export-oriented and privately owned firms, which have benefited from stronger external demand.

The contrast echoes a key theme from 2025, when exports and industrial output held up relatively well while household demand and services lagged. That imbalance was also evident in the non-manufacturing PMI, which slipped back into contraction in January, hitting its weakest level in more than three years. Services indicators such as new orders softened again, underscoring the difficulty policymakers face in shifting growth toward domestic consumption.

Overall, ING concludes that China’s PMI data point to stabilisation rather than recovery. Without a more durable pickup in domestic demand, the economy is likely to remain reliant on external drivers and policy support as 2026 unfolds.

This article was written by Eamonn Sheridan at investinglive.com.

China’s private manufacturing PMI edged higher in January, but rising costs and weak confidence point to a fragile and uneven recovery.

Summary:

• China’s private-sector manufacturing PMI edged higher in January, signalling a second straight month of modest expansion.

• Output and new orders improved, with overseas demand—particularly from Southeast Asia—providing support.

• Employment rose slightly and backlogs eased, pointing to marginal operational improvement.

• Cost pressures intensified, pushing factory-gate prices higher for the first time in over a year.

• The private PMI contrasts with weaker official PMI data, highlighting a still-fragile and uneven recovery.

China’s manufacturing sector showed tentative signs of improvement at the start of 2026, according to private-sector PMI data, though the recovery remains shallow and increasingly challenged by rising cost pressures and subdued confidence.

The RatingDog China General Manufacturing PMI rose to 50.3 in January, up from 50.1 in December, remaining just above the 50 threshold that separates expansion from contraction. While the reading points to continued growth for a second month, the pace of improvement was modest and broadly consistent with a fragile recovery rather than a strong rebound.

Production expanded at a slightly faster rate as manufacturers reported higher new business inflows. Demand conditions improved marginally, supported by a renewed rise in export orders following a contraction in December. Survey evidence pointed to firmer demand from Southeast Asian markets, helping to offset still-soft conditions at home. Total new orders have now expanded for several consecutive months, though growth remained limited, with some firms citing elevated prices and weak underlying market conditions as constraints.

Manufacturers responded to rising workloads by increasing staffing levels for the first time in three months. Although employment gains were modest, the increase in workforce capacity, alongside efficiency improvements, helped reduce outstanding work for the first time since mid-2025. Purchasing activity also strengthened as firms replenished raw materials and semi-finished goods, leading to a second consecutive rise in input inventories. In contrast, stocks of finished goods continued to decline as companies focused on fulfilling existing orders rather than building inventories.

Supply-chain conditions were broadly stable, with delivery times unchanged. However, inflationary pressures intensified. Input costs rose at their fastest pace in four months, driven largely by higher metals prices amid a broader commodities upswing. As a result, manufacturers lifted output prices for the first time since November 2024, with export charges also increasing at the quickest pace in around 18 months.

Despite these improvements, business confidence weakened. Sentiment fell to a nine-month low as firms expressed concern over rising costs and uncertainty around the broader economic outlook. The softer confidence reading reinforces the message that momentum remains fragile.

Crucially, the private PMI stands in contrast to official PMI data from China’s National Bureau of Statistics, which showed both manufacturing and non-manufacturing activity slipping into contraction in January. The divergence underscores the uneven nature of China’s recovery, with pockets of export-linked resilience sitting alongside weak domestic demand and cautious consumers.

Taken together, the data suggest China’s manufacturing sector is stabilising rather than accelerating. Without a stronger demand recovery or more decisive policy support, rising cost pressures risk squeezing margins and limiting the durability of the upturn.

This article was written by Eamonn Sheridan at investinglive.com.

India’s budget-driven derivatives tax hike is seen as a near-term equity headwind, with investors also disappointed by the lack of immediate measures to stem foreign outflows.

Summary:

• India’s budget proposal to raise taxes on equity derivatives trading is being flagged by analysts and fund managers as a near-term headwind for domestic equities, mainly via higher trading friction and potential liquidity impacts.

• The budget increases the securities transaction tax (STT) on equity futures to 0.05% from 0.02% and on options to 0.15% from 0.10%, lifting the cost of trading in a market where derivatives volumes are large.

• The same package did not include major, immediate measures to entice foreign flows, a key disappointment given ongoing foreign selling.

• Indian equities fell sharply on budget day, reflecting concerns about liquidity, valuation sensitivity, and a lack of foreign-investor “sweeteners.”

• The near-term focus is on whether the tax changes cool activity and whether domestic flows can continue to offset foreign outflows amid a tighter global backdrop.

India’s latest budget proposals have put domestic equities on watch after the government outlined higher transaction taxes on equity derivatives, a move analysts say could weigh on near-term sentiment by raising trading costs without delivering immediate offsets aimed at stabilising foreign portfolio flows.

At the centre of investor concern is a proposed increase in the securities transaction tax (STT) applied to derivatives. Under the budget plan, STT on equity futures rises to 0.05% from 0.02%, while the levy on options premium is increased to 0.15% from 0.10% (with the tax on exercised options also lifted). In practice, this increases friction in a part of the market that plays an outsized role in price discovery and liquidity.

Market participants argue the bigger issue is not only the tax increase itself, but the timing and the policy mix. The budget did not offer major, near-term initiatives designed specifically to draw foreign capital back into Indian equities, despite a backdrop of persistent foreign selling pressure. That omission matters because foreign flows often act as a marginal driver of index performance and sector leadership, especially during periods of global risk repricing.

The immediate reaction was risk-off. Indian equities recorded their worst budget-day decline in six years, with broad-based selling across most sectors, as investors priced in potential impacts on trading activity and earnings sensitivity for market-facing financial firms. A key fear is that higher derivatives costs could reduce volumes and widen spreads at the margin, which can amplify volatility on down days and make rallies harder to sustain.

Strategically, the government appears to be leaning toward cooling speculative excess in an “overheated” derivatives market rather than prioritising flow support. But for equity investors, the near-term question is whether domestic institutional buying remains strong enough to counterbalance foreign outflows, and whether earnings and central bank policy become the dominant catalysts once the budget impulse fades.

Overall, the message from analysts and fund managers is straightforward: a derivatives tax hike can be absorbed over time, but in the near term it risks acting as a drag on sentiment, especially if foreign selling remains active and the policy package lacks immediate confidence-building measures for offshore investors.

—

The big sell-off in Indian stocks tied to the budget tax story occurred on February 1, 2026. Saw India’s main indices post their worst Budget-day performance in six years, with the Nifty 50 down about 1.96% and the Sensex falling around 1.88% as investors sold off broadly and in particular brokers, exchanges and mid-/small-caps amid concerns about higher trading costs and absent measures to support foreign inflows.

This adverse reaction unfolded during a special Sunday trading session held alongside the Union Budget announcement, highlighting how swiftly markets repriced risk once the tax changes were unveiled.

This article was written by Eamonn Sheridan at investinglive.com.

Japan’s manufacturing sector returned to growth in January, posting its strongest improvement since 2022 as demand, output and hiring all rebounded.

Summary:

• Japan’s manufacturing sector returned to expansion in January, recording its strongest improvement since August 2022.

• Output and new orders rose for the first time in well over a year, signalling a broad-based recovery in demand.

• Employment growth accelerated sharply as backlogs of work increased for the first time in three-and-a-half years.

• Cost pressures intensified, pushing selling price inflation to a 19-month high, partly reflecting yen weakness.

• Improved demand optimism was tempered by concerns around inflation and the durability of future growth.

Japan’s manufacturing sector showed its clearest signs of revival in nearly three-and-a-half years at the start of 2026, with January PMI data pointing to a broad-based improvement in activity, demand, and employment. The latest survey suggests that factories are emerging from a prolonged period of stagnation, supported by stronger domestic and external demand, even as rising cost pressures re-emerge as a key risk.

The headline S&P Global Japan Manufacturing PMI rose to 51.5 in January from 50.0 in December, moving back into expansion territory and marking the strongest improvement in operating conditions since August 2022. While the pace of growth remains moderate, the breadth of improvement across output, orders, and hiring underscores a notable shift in momentum.

Production returned to growth for the first time since mid-2025 as new business inflows strengthened. Total new orders expanded at their fastest pace in nearly four years, reflecting improved demand conditions and successful product launches. Export demand also improved meaningfully, with overseas orders rising for the first time since early 2022, supported by firmer demand from key markets including the United States and Taiwan. Investment goods producers led the recovery, though gains were seen across all major manufacturing segments.

The rebound in demand placed renewed pressure on capacity. Backlogs of work increased for the first time in three-and-a-half years, prompting firms to step up hiring. Employment growth accelerated to its strongest pace in more than three years as manufacturers sought to rebuild capacity after a prolonged period of caution. Purchasing activity also increased for the first time since late 2024, reinforcing the view that firms are positioning for sustained output growth.

Despite the improving growth backdrop, inventories continued to decline. Input stocks were drawn down as materials were used to support higher production, while finished goods inventories fell at a slower pace as companies fulfilled rising orders. Supply-chain conditions remained mildly stretched, with delivery times lengthening due to staff shortages and low supplier inventories.

Inflation pressures intensified notably. Input costs rose at the fastest pace in nearly a year, driven by higher labour and raw material costs as well as the weaker yen. Firms passed through some of these pressures, lifting factory-gate prices at the sharpest rate in 19 months. While confidence about the year ahead remains generally positive—supported by global demand for semiconductors and automobiles—business sentiment eased slightly as firms weighed inflation risks against the sustainability of demand.

Overall, the January PMI signals that Japan’s manufacturing sector is regaining momentum, but the resurgence in price pressures will be closely watched by policymakers and markets alike.

Earlier:

• Japan PM softens weak yen comments as election and intervention risks collide
• Former “Mr Yen” Watanabe warns of risk of renewed yen selling backlash into Japan election
• BoJ: Moderate recovery, inflation persistence reinforce cautious further tightening case

This article was written by Eamonn Sheridan at investinglive.com.

Australia’s manufacturing sector started 2026 with stronger growth momentum, supported by rising orders, hiring, and improved confidence.

Summary:

• Australia’s manufacturing sector expanded at a faster pace in January, marking a third consecutive month above the growth threshold.

• New orders strengthened sharply, including the first rise in export demand in five months, lifting production momentum.

• Employment growth accelerated to its strongest pace since early 2023 as firms responded to rising workloads.

• Supply-chain frictions persisted, contributing to higher input costs and renewed selling price inflation.

• Business confidence improved to its highest level in nearly four years, supported by a more optimistic demand outlook.

Australia’s manufacturing sector entered 2026 on firmer footing, with January PMI data pointing to a clear acceleration in activity and improving demand conditions. The latest survey results indicate that growth momentum has broadened across output, orders, employment, and purchasing, reinforcing signs that the sector is emerging from a prolonged period of subdued conditions.

The headline manufacturing PMI rose further above the 50 threshold in January, signalling a third consecutive month of expansion and the fastest pace of improvement in five months. Output growth strengthened as manufacturers reported a solid uplift in new business inflows, supported by both domestic demand and a renewed contribution from overseas markets. Notably, export orders expanded for the first time since late winter, suggesting external demand is beginning to stabilise after a prolonged lull.

Stronger order books prompted firms to lift production schedules and expand capacity. Employment levels rose at the fastest pace in almost three years, reflecting both higher current workloads and improved confidence in future demand. The increase in staffing helped manufacturers reduce outstanding work, easing some operational pressures even as activity picked up.

Purchasing activity also increased for a third straight month, broadly tracking the improvement in new orders. However, supply-side challenges remain a constraint. Manufacturers continued to report transport bottlenecks, port congestion, and material shortages, which led to further deterioration in supplier delivery times. While the pace of delays eased slightly, logistical disruptions contributed to slower inbound shipments and a further drawdown in input inventories. At the same time, delays to outbound deliveries resulted in an accumulation of finished goods stocks.

Cost pressures intensified at the start of the year. Higher raw material prices and ongoing supply constraints drove the fastest rise in input costs in nine months. In response, manufacturers passed some of these increases through to customers, lifting selling prices again in January. That said, both input and output price inflation remained below long-run survey averages, suggesting cost pressures, while rising, are not yet excessive.

Encouragingly, sentiment across the manufacturing sector improved markedly. Firms reported their strongest confidence in nearly four years, underpinned by expectations of firmer economic growth, improving market conditions, and planned business investment. Forward-looking indicators, including new orders and future output expectations, point to continued expansion in the months ahead, although supply constraints and inflation dynamics remain key risks to monitor.

This article was written by Eamonn Sheridan at investinglive.com.

China is doubling down on its long-term push to internationalise the yuan, but structural and policy constraints still limit its reserve-currency appeal.

Summary:

• President Xi Jinping, in an article published on Saturday in Qiushi, the Communist Party’s leading theoretical journal, has renewed calls for the yuan to evolve into a global reserve currency, underscoring Beijing’s long-term ambition to reduce reliance on the US dollar.

• Said China must build a “strong currency” that can be widely used in international trade, investment and foreign exchange markets, and eventually achieve global reserve status.

• China is expanding infrastructure to support yuan usage, including trade settlement, currency swaps, and alternative payment systems.

• Progress on internationalisation remains uneven, with capital controls and policy caution limiting the yuan’s reserve appeal.

• Cooperation with Russia and BRICS partners is accelerating, but structural and geopolitical hurdles remain significant.

• Markets see the yuan as undervalued, though authorities remain wary of rapid appreciation or destabilising inflows.

China is sharpening its long-standing ambition to elevate the renminbi to global reserve currency status, with President Xi Jinping calling for the development of a “strong currency” capable of broader international use. The renewed emphasis highlights Beijing’s strategic objective of reducing dependence on the US dollar while strengthening China’s financial influence globally.

China has made steady progress in expanding the yuan’s footprint in trade settlement, with close to one-third of its foreign trade now conducted in local currency. This shift reflects both policy encouragement and geopolitical realities, particularly as trade and financial frictions with the United States persist. While Xi did not directly reference the dollar, the broader direction of policy leaves little doubt that China aims to create credible alternatives to dollar-based financial infrastructure.

At the core of this push is a recognition that China’s financial system, while vast, still lacks depth and resilience compared with established reserve-currency issuers. Despite holding one of the world’s largest banking systems, foreign exchange reserves, and capital markets, policymakers acknowledge that scale alone does not equate to global trust or dominance. Building a genuine financial powerhouse, Chinese officials concede, will require years of institutional development.

Beijing has intensified efforts on several fronts. The Cross-Border Interbank Payment System has been expanded as a parallel settlement mechanism to SWIFT, particularly in transactions involving Russia. Energy trade between the two countries is increasingly settled in yuan, reinforcing bilateral momentum while insulating flows from sanctions risk. Beyond Russia, China has signed currency swap agreements with roughly 50 economies, providing liquidity backstops that facilitate local-currency trade and financial cooperation.

China is also working through multilateral channels. Within the expanded BRICS grouping, discussions continue around alternative payment systems and, longer term, the concept of a shared settlement currency. These initiatives are framed as diversification efforts rather than outright challenges, though they have drawn sharp warnings from Washington.

From a market perspective, the yuan’s international role remains constrained. Capital controls, limited convertibility, and policy-driven exchange rate management continue to limit its attractiveness as a reserve asset. While the currency has strengthened over the past year and is widely viewed as undervalued on long-term metrics, authorities remain cautious about allowing sharp appreciation that could disrupt exports or financial stability.

Taken together, China’s strategy reflects persistence rather than urgency. The path to reserve currency status is likely to be gradual, shaped as much by institutional reform and global confidence as by geopolitical ambition.

This article was written by Eamonn Sheridan at investinglive.com.

China’s January PMI data point to a soft start to 2026, with weak domestic demand offsetting pockets of resilience in high-tech manufacturing.

Summary:

• China’s official manufacturing PMI slipped back into contraction in January, underscoring persistent domestic demand weakness at the start of 2026.

• Services and construction activity also fell into contraction, marking the weakest non-manufacturing reading since late 2022.

• New orders and export orders both deteriorated, signalling fragile momentum beyond seasonal effects.

• Policymakers are accelerating targeted fiscal and monetary support, but confidence in a rapid demand rebound remains limited.

• Official optimism around high-tech and export resilience contrasts with softer consumption and property-sector stress.

China’s economy showed renewed signs of strain at the start of the year, with official January PMI data highlighting a loss of momentum across both manufacturing and services. Factory activity slipped back into contraction territory, while the non-manufacturing sector recorded its weakest reading since late 2022, reinforcing concerns that domestic demand remains fragile despite ongoing policy support.

The official manufacturing PMI fell to 49.3 in January from 50.1 previously, undershooting market expectations and marking a clear reversal from December’s marginal expansion. The deterioration was broad-based. New orders dropped back below the 50 threshold, while export orders weakened further, pointing to subdued demand conditions both at home and abroad. Production was relatively more resilient, but not enough to offset the drag from softer demand indicators.

The non-manufacturing PMI, which captures services and construction, also declined sharply to 49.4. This suggests that post-holiday spending failed to provide a meaningful lift, with cautious consumers and ongoing property-sector stress weighing on activity. Together, the PMI readings point to an economy struggling to generate self-sustaining momentum at the start of 2026.

Chinese officials have emphasised seasonal distortions around the (yet to come holiday) Lunar New Year, and state media has highlighted pockets of resilience, particularly in high-tech and equipment manufacturing. Some segments linked to advanced manufacturing and exports remain in expansion, supported by external demand for technology-related goods. Business sentiment indicators also suggest firms are cautiously optimistic about the months ahead.

However, this optimism sits uneasily alongside softer consumption trends. Retail sales weakened into the end of last year, pulling quarterly GDP growth to its slowest pace in three years, and policymakers are increasingly focused on stimulating household demand rather than simply expanding supply. Recent measures include front-loaded fiscal spending, consumer trade-in subsidies, and targeted rate cuts, alongside signals that broader reserve-requirement and interest-rate reductions remain on the table.

Looking ahead, authorities are expected to balance near-term growth support with longer-term structural goals, including technological self-reliance and services-sector expansion. While China is likely to set a 2026 growth target in the 4.5–5% range, the January PMI data underline that achieving the upper end of that range will require more forceful and coordinated policy action in coming months.

This article was written by Eamonn Sheridan at investinglive.com.

As is usual for a Monday morning, market liquidity is very thin until it improves as more Asian centres come online … prices are liable to swing around, so take care out there.

Not too much change from late Friday, USD mostly a tiny bit higher:

I’ll be back with some weekend news soon … sneak preview, China PMIs missed:

This article was written by Eamonn Sheridan at investinglive.com.