China’s factory and services PMI gauges both drop below 50 as fourth quarter starts on a weak note

Because the data came out on a Saturday, Monday’s Asian session is the first chance for markets to price the miss. Softer Chinese factory demand is usually a headwind for industrial metals such as copper and iron ore, and for China-sensitive currencies including the yuan and the Australian dollar. Chinese equities may be partly cushioned by expectations of more policy support. For oil, a weaker demand signal from a key crude buyer would normally weigh on prices, but for now it is likely to be overshadowed by supply risk in the Strait of Hormuz. Price sub-indices that are easing but still elevated also weaken the case for reading the release as disinflationary.