Anemic Chinese PMI could fuel rate cut

China's official PMI declined to a weaker-than-expected 49.2% from 50.1% in July.

This suggests still-stagnant growth for the country, and will likely lead the Chinese central bank to slash 100-150bps in the RRR and 150bps in interest rates by the end of the year.

Here's more from BBVA:

The index fell to below 50 for the first time since November 2011, reflecting weaker production, as well as both domestic and external demand components. Meanwhile, the private-sector (Markit) PMI, released today, also weakened sharply, to 47.6 (compared to a flash estimate on August 23 of 47.8) from 49.3 in July.

Taken together, the data releases reveal that China’s growth momentum has yet to rebound, raising the likelihood of further policy in the form of further cuts in the RRR and interest rates--with inflation well contained at around 2%, we anticipate 100-150bps cuts in the former and up to 50bp cuts in the latter by year-end. Most regional markets, including Shanghai (0.6%), were up on expectations of more policy easing.

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