China’s factory sector is at a decade-high due to a surge in domestic demand, but exports to the US and Europe have slowed due to a spike in COVID-19.

Getty Images 1283348581
  • China’s factory sector activity in October grew at its fastest rate in nearly 10 years as domestic demand for travel, leisure and consumer goods increased in its economy.
  • Asia’s second-largest economy is recovering from a weak start to the year, but the U.S. And there is a risk of declining export demand due to the growing case of COVID-19 in Europe.
  • The latest reading of the IHS market for the manufacturing sector was the highest since January 2011.
  • “Once markets go through the U.S. election risk event and finally put the risk in the rear-view mirror, China should support the cyclical rotation in Chinese stocks by improving the landscape,” said Stephen Ines, Axis’ chief global market strategist.
  • Visit Business Insider’s homepage for more stories.

China’s factory activity reached nearly a decade-high in October, emerging from a deep recession brought on by a coronavirus epidemic earlier this year.

Consumer demand increased as people spent on travel, leisure and shopping during the week-long national holiday in October.

According to the Chinese Ministry of Culture and Tourism, during the Golden Week holiday,% of China’s population travels within the country and. Costs 466..6 billion yuan (.5 .5..5 billion).

Which accounted for a 21% decline in domestic tourists from the same period last year, but shows that the mode of consumption is returning to normal.

IHS Markets ‘China Manufacturing Purchasing Managers’ Index (PMI) posted a reading of 53.6 in October, better than the 53.0 expected by analysts. The result since January 2011 was China’s highest reading.

PMI is a general gauge for measuring the economic direction of business performance and trends in the economy.

During economic downturns, readings below 45 are generally considered weak, and PMIs remain in the mid-50s during expansion. Last month, China posted a reading of .51.5 for its manufacturing sector, confirming that its economy is on track for steady recovery.

read more: An unusual wrinkle in Wall Street’s fear gauge is warning that the next election could provoke a long period of stock market turmoil – one that is much worse than it was in 2016.

“In short, controlling the domestic epidemic is the key to recovery in the current macro-economy,” said Wang Zai, a senior economist at the Caxin Insight Group. “Manufacturing supply and demand improved at the same time.

However, new export orders declined as foreign demand fell sharply from September, due to the second wave of COVID-19 infection in Europe and the third wave in the US.

But positive China data failed to boost the domestic stock market, as Kovid-19 cases continue to break records in the U.S. during election week. Britain just announced a new national lockdown, with Belgium, Greece, Austria and Portugal also revising partial or full sanctions this week.

“Scenes of countries moving back and forth with sanctions are a nightmare for markets, and dealing with multiple levels of uncertainty will be a difficult challenge for investors,” said Milan Katkovic, Axina’s market analyst.

China’s Shanghai Composite was almost flat, Japan’s Nikkei was up 1.3% and Hong Kong’s Hang Seng was up 1.4% on Monday.

“Once the markets go through the U.S. election risk event and finally put that risk behind the mirror, China should support the cyclonic rotation in Chinese stocks,” said Stephen Ines, Axis’ chief global market strategist.

read more: Warren Buffett’s Berkshire Hathaway provoked the deal with extreme caution in 6 months. We asked a bunch of experts to analyze his changing strategy