Stock Markets Extend Gains on China Turnaround

Europe and Asia posted gains at the close, and Wall Street registered another strong session to open the second quarter. Analysts also cited optimism over US-China trade talks as a positive driver.

Don't forget what #Chinese free trade meant so far:

Average tariff of ~10% for US goods
Average tariff of ~3% for Chinese goodshttps://t.co/kTXGlQZwW8

— Valentin Schmid (@vxschmid) April 2, 2019

The broad-based S&P 500 jumped 1.2 percent, extending the positive trend after notching its best quarterly performance since 2009.

Markets had stumbled towards the end of March on worries about slowing growth or a recession but “it feels like some of that concern is receding,” said Art Hogan, chief market strategist at National. “The data is starting to stabilize,” he said.

US manufacturing data was strong. US retail sales disappointed in February but the result was tempered somewhat by an upward revision to the January data.

Photo: Getty Images

The yield on the 10-year US Treasury yield jumped on Monday. Last week’s dip in the benchmark had been seen as a sign of medium-term economic weakness.

But the day’s most oft-cited catalyst was a March purchasing managers index showing growth in the Chinese manufacturing sector was far better than expected.  “The Chinese manufacturing sector has been under the microscope… as a weekend of positive news for the sector helps drive markets higher,” said Joshua Mahony, senior market analyst at IG trading group.

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“Four months of stagnant and negative growth in the manufacturing sector has understandably hit sentiment globally, given the impact Chinese business has upon global growth. “Thus it comes as no surprise to see the optimists come out in force today” after the strong figures. “The manufacturing print… will go a long way to allaying slowdown fears about China, at least in the short-term as the US-China trade talks move back to Washington this Wednesday,” said OANDA senior market analyst Jeffrey Halley.

Top negotiators from the world’s two biggest economies meanwhile flagged progress in last week’s discussions in Beijing on the tariffs row ahead of this week’s talks.