Materials Sector to be Under Pressure by China’s Slower Manufacturing Growth

Published on Monday, 31 May 2010 23:04 Written by Christian Paolinetti

New York, May 31^st (TradersHuddle.com) – Material stocks will likely see downward pressure into the start of the shortened holiday trading week for the U.S. equity markets after manufacturing in China grew at a slower pace than expected.

The Federation of Logistics and Purchasing announced their Purchasing Managers’ Index fell to 53.9 from 55.7 in April, seasonally adjusted, which was less than the 54.5 economists expected.

The lower growth pace, signals that the government crackdown on property speculation and credit lending is helping cool down the world’s third largest economy.

The Materials Select Spider (NYSE:XLB) fell 1.76% to $30.75, as the stock has been dealing with resistance and a declining 20day moving average. The news of a slowing Chinese economy will likely prompt traders to sell basic materials, which will affect the ETF. Metal prices will be under pressure, as traders will speculate demand for metals like copper and aluminum will slow.