Stocks win boost as China data spurs recovery hopes

LONDON (AFP): Stock markets rose on Wednesday as data showed decade-high Chinese factory activity last month after leaders began reopening the economy from years of zero-Covid measures.

Oil prices fell despite the China figures pointing to a pick-up in demand from the world’s biggest importer of the commodity.

The euro rallied on expectations that the European Central Bank would keep hiking interest rates as inflation in the eurozone remains elevated.

On the corporate front, pan-European stock market operator Euronext said it had withdrawn a non-binding offer to buy Allfunds, a British firm that provides services to fund managers.

Euronext gave no details for the decision concerning the proposed cash-share transaction worth 5.5 billion euros ($5.8 billion).

The forecast-busting reading on China’s manufacturing — the highest since 2012 — reinforced the view that the world’s second-biggest economy would bounce back strongly from last year’s slow growth, as businesses start up and people travel again.

It provided also a much-needed boost for stock markets after a tumultuous month that wiped out much of January’s gains as traders came around to the idea that central banks would need to lift interest rates higher for longer as they struggle to bring inflation under control.

While there were “significant seasonal and event factors” behind the latest data, the “overall trend still points to a solid recovery at the beginning of 2023”, said Zhou Hao of Guotai Junan International.

Eyes are on a high-level meeting in Beijing where officials will set their annual economic growth target and lay out plans to achieve it, including thanks to possible stimulus measures.

The government’s goal “should be in the range of 5.5-6 percent”, said Iris Pang at ING.

“This will not be easy for the government to achieve even though China is gradually recovering. The challenge will come from the weakening external market, which could affect exports and manufacturing activity related to exports.”

Hong Kong’s stock market led gains, piling on more than four per cent in its best performance since early December.

The surge came after it fell for the previous six trading days, and was fuelled by a rally in heavyweight tech firms including Tencent and Alibaba.

Tokyo, Shanghai, Singapore, Manila, Bangkok, Mumbai, Taipei and Jakarta were also in the green but Wellington and Sydney edged down.

London, Paris and Frankfurt rose solidly nearing the halfway stage.
While there is a lighter mood on trading floors, the prospect of rising interest rates continues to cast a shadow, keeping any equities rally in check.

That is causing angst over the outlook for the economy and company profits — particularly tech firms that rely on borrowing — leading to warnings from analysts.
All three main indices on Wall Street fell Tuesday, partially weighed by news that US consumer confidence unexpectedly fell in February on rising prices and worries for the outlook.

Rate worries were also growing in Europe after news that inflation picked up in Spain and France last month, while investors are now betting on European Central Bank borrowing costs to peak at four percent, compared with the current 2.5-3.25 percent.