CHINA'S FACTORY GROWTH SLOWER BUT RESILIENT AT YEAR END

(Reuters) - Growth in China's factories slowed slightly in December as export orders and output weakened, official data showed on Wednesday, adding to views that while the world's second-largest economy remains resilient, it lost some steam in late 2013.

The official Purchasing Managers' Index (PMI), published by the National Bureau of Statistics, dipped to 51.0 in December. Economists polled by Reuters had expected the PMI to ease to 51.2 from November's 51.4. The 50-point mark separates an expansion in activity from a contraction.

Many economists have said China's economy was likely to show weaker momentum in the final three months of 2013 after a rebound between July and September, due to slowing credit growth and a fall-off in restocking demand.

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"Both domestic and overseas demand was weaker than expected. Domestically, tight liquidity is weighing on factory output and orders," said Li Heng, an economist at Minsheng Securities in Beijing.

"The economy is under some under downward pressures but the slowdown remains modest. We still need to observe on the trend next year. We think Q4 GDP growth should be 7.7 pct and the same for Q1 2014," he said, adding that he saw economic growth for 2014 at around 7.5 percent.

The government has said industrial output may have grown 9.8 percent in 2013, and economic growth could come in at 7.6 percent, just above the official target of 7.5 percent and slightly below the 7.7 percent pace in 2012.

Sources at top government think tanks told Reuters this week that the government would likely set a 7.5 percent growth target for this year.

The PMI survey showed new export orders contracted in December for the first time since July, with the sub-index at 49.8 from November's 50.6, pointing to weakness in overseas demand.

Manufacturing employment contracted further in December, with the sub-index falling to 48.7 from November's 49.6.

"The decline in the December PMI points to some slowdown in economic growth, said Zhang Liqun, an economist at the Development Research Center, which helps compile the PMI.

"Industrial output growth is likely to slow in the future and export growth could also ease, showing the economy still faces some downward pressure," he said.

The official PMI broadly mirrors a preliminary PMI survey released in mid-December by HSBC and Market Economics, which showed factory sector activity grew at the slowest pace in three months due to subdued output.

The final HSBC/Market PMI is due on Thursday, at 9:45 am 0145 GMT). It is more weighted towards smaller and private companies than the official one, which contains more large and state-owned firms.

(China economics team; Editing by John Mair)

AGILITY IS CRITICAL EVEN FOR LONG-TERM TRADERS

Talking Points

-AUD/USD fundamental case for a counter trend trade

-Framing a trade using Fundamentals and entering using Technical

-Be quick in identifying market sentiment

In April, the Australian Dollar found itself in a perfect storm of negativity. On the home front, a sharp downward revision in Chinese economic growth expectations spilled over into fears of lost export demand and weighed on RBA policy bets. On the global side of the equation, the Federal Reserve began to introduce the concept of “tapering” its QE asset purchases, driving liquidation across the risky asset spectrum. By mid-May, the Aussie lost its grip on parity with the US Dollar. By August, it was trading below the USD 0.90 mark at levels unseen in three years.

Around this time, I began to think the move was over-stretched and vulnerable to a correction. After a heavy surge, the weekly build in speculative net-short AUD positions began to slow. A string of better-than-expected Chinese economic news releases arrested the slide in growth expectations. Fed officials were doing their utmost to talk down the volatility they themselves unleashed. Simply put, the Aussie looked to be running out of fresh bad news, and it seemed only a matter of time before profit-taking would begin to sweep the trade.

A bullish Piercing Line candlestick pattern on the weekly chart offered the technical trigger to put this fundamental view in motion and I entered long at 0.9189. After bumping along the bottom for a few weeks, the Aussie launched an impressive rally, reversing half of its losses by mid-October. Throughout this time, I maintained that the overall AUD/USD trend was bearish and the long trade purely tactical, aiming to take advantage of a bounce before reverting to the short side. When the time came to switch sides arrived however, the plan unraveled.

I booked profits on the trade at 0.9463 as the pair began to turn and a week later noted the bearish reversal chart setup that would ultimately mark down trend resumption. However, I was simply not mentally prepared to jump in short. The long position from August took weeks of research and fine-tuning. This shaped a stark world view that became difficult to swiftly abandon because of the sheer time spent formulating it. I remained on the sidelines and watched as the Aussie resumed dropping, returning to Augusts’ lows by year-end.

From:  http://www.dailyfx.com