Tuesday, 2 June 2009

Global stocks surge as manufacturing shows signs of recovery

It looks like financial markets are all ready to welcome the global economic recovery. From Bloomberg:

The S&P 500 surged 2.6 percent to 942.87 at 4:08 p.m. in New York, its highest close since Nov. 5. The Dow rose 221.11 points, or 2.6 percent, to 8,721.44, the highest since Jan. 8. Almost nine stocks climbed for each that fell on the New York Stock Exchange.

Europe’s benchmark Dow Jones Stoxx 600 jumped 2.9 percent, the biggest gain in two months, and the MSCI Asia Pacific Index advanced 1.9 percent to the highest since October. The MSCI Emerging Markets Index, up 61 percent the past three months, posted the steepest advance in almost a month with a 3.7 percent climb...

U.S. bonds dropped, driving the yield on the benchmark 10- year note 20 basis points higher to 3.67 percent, the steepest increase in eight months.

Economic reports provided good reasons to cheer. Bloomberg reports the US data.

Manufacturing in the U.S. shrank less than forecast in May, spurred by the first gain in new orders since the recession began, a sign companies are increasingly confident the slump will end this year...

The Institute for Supply Management’s factory index rose to 42.8, the highest level since September, from 40.1 in April; readings of less than 50 signal a contraction. Consumer spending fell 0.1 percent in April and the savings rate rose to 5.7 percent, spurred by an unexpected jump in incomes linked to the fiscal stimulus, Commerce figures showed...

... Spending on construction unexpectedly rose in April, led by gains in residential and commercial building, Commerce also reported. The 0.8 percent gain was the biggest since August and followed a revised 0.4 percent increase the prior month.

Europe's manufacturing sector is also showing signs of improvement. Bloomberg reports:

Europe’s manufacturing industry contracted at the slowest pace in seven months in May, adding to signs that the worst may be over.

A gauge of manufacturing activity rose to 40.7 from 36.8 in April, Markit Economics said today. That was the biggest increase since the survey started in 1997 and compared with the initial estimate of 40.5 published on May 21...

And the same story is told for the UK by Reuters.

The manufacturing PMI rose to 45.4 last month from an upwardly revised 43.1 in April, beating the consensus forecast of 44.0, but is unlikely to alter expectations that interest rates will stay at record lows for some time to come.

That marked the third consecutive month of improvement in the headline index, which has been below the 50 level which separates expansion from contraction for more than a year.

Friday had shown that the Nomura/JMMA Japan Manufacturing Purchasing Managers Index rose to 46.6 in May from 41.4 in April.

But it was China that really sparked the markets on Monday by reporting another month of manufacturing expansion. From Reuters:

China's manufacturing sector continued to expand moderately in May as new export orders improved, two surveys showed on Monday, adding to tentative signs that the world's third-largest economy is stabilising...

The official purchasing managers' index (PMI) fell slightly to 53.1 from 53.5 in April, its third straight month above the mark of 50 that separates expansion from contraction.

A separate PMI published by Hong Kong-based brokerage CLSA rose to a 10-month high of 51.2 from 50.1 in April, its second month above 50.

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