World shares lift after positive Chinese data on industrial firms

London — Global shares rose on Monday, aided by data showing profits at Chinese industrial firms grew for the first time in four months and a strong reading of US first-quarter growth data last week.

The MSCI all-country world index of shares, which tracks stocks in 47 countries, was up 0.06% after the start of European trading.

Most major European stock markets traded firmer, with the pan-European Stoxx 600 index up 0.1%.

Spain’s Ibex 35 index underperformed peers, however, down more than 0.5% after Prime Minister Pedro Sanchez overcame a challenge by right-wing nationalists in elections on Sunday. The elections had little immediate effect on the country’s bond market.

Shares in Italian banks got a boost and Italian government bonds rallied after S&P Global Ratings affirmed Italy’s sovereign credit rating.

Still nagged by uncertainty over the outlook for the global economy, investors were looking to a meeting of the US Federal Reserve this week and Chinese factory data for further clues on policy direction in the world’s biggest economies.

“For stock traders, it seems that the important catalysts are pointing higher: the US sees strong domestic growth, low inflation keeps the Fed at bay and could potentially trigger a rate cut so it seems that equities have nowhere to go but higher — at least in the short term,” said Konstantinos Anthis, head of research at ADSS.

Chinese blue-chips rose more than 1% after losing 5.6% last week, leading Shanghai shares to an intraday high in afternoon trade.

Australian shares were down 0.4% after hitting an 11-year closing high on Friday, while Seoul’s Kospi was up 1.4%.

Japan’s financial markets are closed for a long national holiday this week, but Nikkei 225 futures index in Singapore was 0.9% higher.

Monday’s gains follow data showing US GDP grew at a 3.2% annualised rate in the first quarter.

Nomura FX strategist Jordan Rochester noted that US GDP was driven by a surge in inventories, government spending, and a big contribution from net trade. “None of those are likely to be sustained, hence why market reaction was limited,” he said in a note to clients.

“But overall, the past week has been dominated by higher US equity prices and consequently a US dollar outperformance story. In our view, this week should see a test of that new trend,” he said, referencing upcoming economic data this week.

In China, fresh data showed industrial profits grew in March after four months of contraction, but analysts said sentiment remained fragile. Economists polled by Reuters expect factory activity in the world’s second largest economy to grow at a steady but modest pace in April.

In contrast with weakness in Asian markets last week, Wall Street ended Friday on a high note, propelled by the GDP figures.

The March reading for core personal consumption expenditures (PCE), the Fed’s favoured inflation measure, is due later on Monday. The central bank’s federal open market committee (FOMC) will announce its policy decision on Wednesday, with chair Jerome Powell expected to balance the strong domestic growth data against persistent concerns over the global outlook.

Markets will also be looking to global factory activity surveys this week, particularly official and private readings on Chinese manufacturing which will both be released on Tuesday.

With Japan on an extended break, currency markets were calm ahead of the FOMC meeting and US jobs numbers. The dollar was 0.2% higher against the yen at ¥111.74, and the euro was up 0.1% at $1.1162.

The dollar index, which tracks the greenback against a basket of six major rivals, slipped 0.03% to 97.985.

Oil prices fell, extending a slump from Friday that ended weeks of rallying, after US President Donald Trump demanded that oil cartel Opec raise output to soften the effect of US sanctions against Iran.

Brent crude fell 0.5% to $71.80 per barrel.

Spot gold was down 0.3%, trading at $1,281.81 per ounce.

Reuters