Asian and European stocks rallied on Wednesday as robust Chinese manufacturing data lifted investors’ spirits following muted trading the previous day.
Hong Kong’s Hang Seng index leapt 4.2 per cent, and China’s CSI 300 climbed 1.4 per cent. Europe’s region-wide Stoxx 600 was up 0.1 per cent, and Germany’s Dax and France’s Cac 40 gained 0.3 per cent. The FTSE 100 rose 0.5 per cent.
Figures released on Wednesday showed that China’s manufacturing sector expanded at its fastest pace in more than a decade, in an unambiguous signal that its economy was rebounding after the lifting of the punitive zero-Covid regime.
According to the National Bureau of Statistics, the official manufacturing sector purchasing managers’ index was 52.6 last month, up from January’s 50.1 and higher than economists’ expectations of 50.5. A figure of more than 50 indicates growth in the number of companies reporting expansion. The reading is the highest since April 2012.
Chinese households’ excess savings are also likely to accelerate growth in the world’s second-largest economy, according to Citi Asia analysts.
“China has returned to work with a sense of urgency after the Chinese new year and with Covid concerns behind. The sizeable excess household savings provide a support for ‘revenge spending’ in the initial stage of the recovery,” they said in a note.
The rally offers some relief after a dismal month for equities in February. Successive releases of robust economic data on both sides of the Atlantic persuaded investors that inflation and thus interest rates would stay higher for longer.
“It was a pretty bad month on the whole, with losses across equities, credit, sovereign bonds and commodities,” said analysts at Deutsche Bank. “That came amidst growing concern about inflation, which led investors to ramp up their expectations for central bank rate hikes.”
Investors will be watching next week for the latest signals on inflation from payroll and unemployment data out of the US. While the Federal Reserve has struck a consistently hawkish tone, officials from the European Central Bank have shown expressed differences in opinion, with governing council member François Villeroy de Galhau saying on Wednesday that it would be “desirable” for rates to peak by summer.
“You’d expect more [diversity of opinion] in the ECB, as they have to deal with national biases, whereas the Federal Reserve only has to take regional ones into account,” said Neil Birrell, chief investment officer at Premier Miton.
US futures climbed on Wednesday, with the blue-chip S&P 500 rising 0.1 per cent and the tech-heavy Nasdaq gaining 0.2 per cent.
The dollar fell 0.4 per cent, while the euro rose 0.6 per cent. Sterling gained 0.5 per cent.
In government debt markets, US 10-year Treasuries rose 0.04 percentage points to 3.96 per cent, while two-year notes, which are more sensitive to monetary policy, gained 0.05 percentage points to 4.85 per cent. Ten-year German Bunds rose 0.07 percentage points to 2.71 per cent.
Brent crude rose 0.8 per cent to $84.08 per barrel, while WTI gained 0.7 per cent to $77.62.
