Forex News Chinese Factory Activity Contracts for First Time in 2 Years Chinese Factory Activity Contracts for First Time in 2 Years Monday, 31 December 2018 9:16 Share 0 Tweet 0 Pin it 0 +1 It’s no secret that China’s economy has struggled in 2018, but the extent of the damage is coming more fully to light as the year rolls to a close. China’s factory activity shrunk in 2019 for the first time in 2 years, a sign that has traders braced for a turbulent 2019. The official Purchasing Managers’ Index (PMI) dropped to 49.4 in December, below the 50-point level that creates the distinction between growth and contraction, reports showed on Monday. This is the first contraction in China’s PMI since July 2016, and the worst reading since February 2016. New orders were also lower in December, a sign that a recovery is not on the horizon. The ongoing trade war between the US and China is expected to aggravate the situation further. Chinese stock markets also struggled in 2018, with both the Shanghai Composite and the Shenzhen Composite easing more than 24 percent over the year. All ten sectors of the Shanghai Composite ended the year lower, with the technology sector leading the declines with a 24 percent decrease. All told, the Shanghai Composite saw 2018 as its worst year since 2008 (when it sunk 65 percent on the heels of the global financial crisis). The Shenzhen Composite also saw its worst annual performance in a decade. Analysts remain optimistic that a trade deal will be struck between the US and China which could make inroads in reversing the downtrend, but such a deal is certain to be complicated and is not likely to be confirmed in the near term. Oil Prices Higher Oil prices were higher on Monday, but even gains over 1 percent were unlikely to help the commodity end the year higher. Oil is on track for its first annual decline in three years. US WTI futures were up 1.19 percent as of 3:08 p.m. HK/SIN, to $45.87 per barrel. Brent crude futures were up 1.48 percent to $54.00 per barrel. Prices remain under pressure as a result of the global supply glut which has been largely fueled by aggressive US production, as well as decreased demands as a result of the global economic slowdown and the brewing trade war. Sara Patterson Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.