China's factory activity shrank in October, official data showed Monday, after industries were hit by strict Covid lockdowns.

The Purchasing Managers' Index (PMI) -- a key gauge of manufacturing in the world's second-biggest economy -- came in at 49.2, down from September's 50.1 and below the 50-point mark separating growth from contraction, according to data from the National Bureau of Statistics (NBS).

Sporadic Covid-19 lockdowns around China have dampened demand and business confidence.

The manufacturing PMI has been in contraction territory for six out of the past eight months, as sweeping Covid restrictions paralysed major industrial cities such as Shanghai, Shenzhen and Chengdu and a summer of searing heat hit production.

"In October, affected by the frequent appearance of domestic outbreaks, China's purchasing managers' index declined," NBS senior statistician Zhao Qinghe said in a statement.

Zhao added that "the foundation for China's economic recovery and development needs to be further consolidated", noting both weakened demand and rising raw material prices.

While activity at larger businesses expanded in October, work at small and medium-sized enterprises contracted significantly, with Zhao saying "the pressure on production and operation at small and medium-sized enterprises has increased".

The non-manufacturing PMI came in at 48.7 points in October, a sharp decline from 50.6 in September and "below a critical point", Zhao said in the statement.

Zhao added that Covid outbreaks in October had hit the service industry especially hard, with activity in transport, accommodation and food and beverage businesses falling during a traditional peak period coinciding with week-long national holidays.

"We don't expect the zero-Covid policy to be abandoned until 2024, which means virus disruptions will keep in-person services activity subdued," Capital Economics analyst Zichun Huang said in a note on Monday.

"The deepening global downturn will continue to weigh on exporters. And officials are still struggling to put a floor underneath the property market," Huang added.

Chinese leaders have set out an annual economic growth target of about 5.5 percent, but many observers think the country will struggle to hit the target, despite announcing a better-than-expected 3.9 percent expansion in the third quarter.

And officials have shown no sign that they intend to ease the country's zero-Covid strategy, with President Xi Jinping last week promoting Li Qiang, who oversaw a debilitating two-month lockdown in Shanghai, to the second-most powerful post in the Communist Party.

The economic slowdown has also been exacerbated by a crisis in the massive property sector, where a series of debt-laden developers have defaulted on loans.

Markets rise on rate hopes ahead of Fed decision
Hong Kong (AFP) Oct 31, 2022 - Most markets rose Monday ahead of a crucial Federal Reserve policy meeting later in the week, with investors hoping for a less hawkish tilt in their plans for interest rates.

A sense of relief has settled on trading floors over the past week following a report that the US central bank could take its foot off the accelerator in its push to rein in decades-high inflation.

Adding to the positive mood has been an indication that others around the world are looking at slowing down, though the excitement was tempered Friday by record inflation readings in Europe and data showing prices remained elevated.

Asian dealers were given a strong lead from Wall Street, where all three main indexes ended more than two percent higher thanks to a rally in tech firms following a strong earnings report from Apple.

Tokyo, Hong Kong, Seoul, Singapore, Taipei and Wellington all piled on more than one percent, while Sydney and Jakarta were also up.

However, Shanghai fell on concerns about China's growth outlook as the government presses on with its zero-Covid strategy of lockdowns, with restrictions imposed in towns and cities nationwide.

Data showing activity in the factory and services sectors contracted last month highlighted the impact the measures are having on the world's number two economy.

All eyes are on the Fed's policy meeting, which ends Wednesday.

While it is widely expected to announce a fourth successive 75 basis point hike, traders will be poring over the post-meeting statement looking for a hint officials are open to dialling back the pace of increases.

The gathering comes as other central banks have recently indicated they are willing to ease up, with Canada raising rates less than expected last week, while authorities in Australia and Europe have taken a more dovish view.

Concerns that rapidly rising borrowing costs will send economies into a recession has hammered markets globally this year.

"There has been a succession of central bank downshifts, adding to the 'peak hawkishness' theme running through macro markets," said SPI Asset Management's Stephen Innes. "And investors are entirely focused on these U-turns as peak rates get priced in.

"So, people don't want to miss the stock market rally wagon, especially if the Fed conveys a similar policy downshift this week, sending the rally into overdrive as pivot procrastinators will be forced to chase."

A better-than-expected earnings season has also provided support to global markets, easing concerns that tighter monetary policies would hammer firms' bottom lines, though big-name tech giants have taken a blow.

National Australia Bank's Rodrigo Catril said more than 70 percent of companies that had reported had beaten forecasts, though he added that while markets had risen over the past month, some traders remained cautious.

"Those with a positive inclination may look at October's equity performance as a sign of a new uptrend while others would suggest we have not yet seen the worst given the lag effects from monetary policy and the prospect of still more tightening to come," he said in a note.

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China economic slowdown to drag on Asia growth: IMF
Beijing (AFP) Oct 28, 2022
China's "sharp and uncharacteristic" economic slowdown is expected to drag on growth across Asia through the end of next year, the International Monetary Fund (IMF) warned Friday, darkening an already gloomy global outlook. Worldwide economic prospects have dimmed this year as countries have faced higher living costs, tighter financial conditions and increased uncertainty following Russia's invasion of Ukraine. The crises have dulled the rebound from the Covid-19 pandemic, even as Asia has remai ... read more