China's National Bureau of Statistics on Tuesday (31/January) published manufacturing PMI data which increased from 47.0 to 50.1. The gains topped market expectations for a rise to 49.8.

It was marking a return of manufacturing activity to the expansion path. The improvement in China's manufacturing sector was supported by an increase in several components. 

The new orders sub-index jumped for the first time in the last 7 months from 43.9 to 50.9. It was as did buying activity which eventually recorded growth from 44.9 to 50.4. 

That was especially after 4 months of continuous contraction. Not only manufacturing activity, but the service sector also recorded positive results. 

China’s Services PMI jumped Sharply 

China's Services PMI even jumped sharply from 41.6 to 54.4 in January which was outperforming market expectations at 52.0. Meanwhile, the Composite PMI increased from 42.6 to 52.4. 

The Chinese government's decision to abandon the Zero COVID policy is alleged to be the main factor driving the rebound in manufacturing and services this time. 

According to senior NBS statistician Zhao Qinghe, China's recovering business and investment climate is fueling the growing optimism of businesses there. That makes many parties are more optimistic.

However, he noted that there are obstacles that are still weighing on the Chinese economy for the time being. Market participants have to make it as a concern. 

China’s Manufacturing is Recovered Impressively 

Indeed, China's manufacturing and services sector recorded a fairly impressive recovery in January. However, the analysts still found a number of complaints from companies that claimed that market demand was not fully solid.

That is the main concern of their business. People expect China's economic recovery to still take time as it was said by Zhao. The market expects China's economy to make a recovery this year. 

In its latest projections, the IMF expects China's economy to grow by 5.2 percent in 2023. The projection is much higher than the 3.0 percent growth achieved last year.

Oil slipped as rising sentiment on interest rate hikes by major central banks and signs of strong Russian exports offset. Those was rising the Middle East tensions over drone attacks on Iran and hopes of higher Chinese demand.

Brent Crude Fell by 27 Cents

Market participants expect the United States Federal Reserve to raise interest rates by 25 basis points on Wednesday. It was followed by half-point gains by the Bank of England and the European Central Bank.

Brent crude fell by 27 cents, or 0.3%, to $86.39 a barrel. Meanwhile, the US West Texas Intermediate crude fell by 30 cents, or 0.4%, to $79.38.

The market is also under pressure from indications of strong Russian supply despite an EU ban and G7 price restrictions imposed over the invasion of Ukraine. Both oil benchmarks last week recorded their first weekly losses in three weeks.

In addition to the central bank meeting, Wednesday's meeting of the chief ministers of the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia will also be in focus. 

Oil Production Policy is maybe Unchanged 

The OPEC+ panel meeting done in Wednesday was unlikely to change their production policy. However, it could shock the market with small cuts as said by oil brokerage PVM.

The Federal Reserve announced its latest policy decision on Wednesday, while the European Central Bank and the Bank of England will follow on Thursday. All of them have a possibility to raise their rate hikes. 

But there is more uncertainty about how will guide expectations over the future interest rate path. It is especially with inflation set to recede and economic growth to recede.

Markets expect the Fed to raise rates by just 25 basis points to the upper limit of 4.75%. Meanwhile, ECB officials have directed a 0.5% hike, which would bring the deposit rate to 2.5% and the refinancing rate to 3.0%.