It’s April 1, so watch out for the pranksters.
But the quarter may be off to a decent start, no foolin’ after a batch of better-than-expected Chinese manufacturing data. Equities around the world are climbing, while bonds yields are rising after China’s manufacturing purchasing managers index saw the biggest jump since 2012, which could be a sign that stimulus efforts from the government are starting to pay off. beating forecasts.
Given four months of stagnant growth in the sector, it’s “no surprise to see the optimists come out in force today,” Joshua Mahony, senior market analyst at IG, told clients.
The week is a big one for economic data out of the U.S. and elsewhere. And good news from China will cheer those strategists, who see it greasing the growth wheels for the rest of the world, helping drive gains for Wall Street as doubts linger over the U.S. economy and coming earnings season.
But our call of the day from UBS’s chief economist Paul Donovan, says investors want to take this latest China data with a grain of salt, as he says it’s not presenting a true underlying picture.
“The problem we have here is this is not real economic data, this is sentiment data,” Donovan told MarketWatch in an interview Monday. Firstly, he says, the correlation between sentiment and real data is far weaker than it was 10 years ago, and part of that is due to the fact that fewer people and companies fill in surveys like the PMI.
Over time, Donovan says that sentiment data tends to be far more volatile than actual economic data, while it’s also tied to a media cycle. For example, at the end of last year, a lot of news headlines were flashing concerns about China and U.S. trade talks, though recent ones have been far more upbeat. He said Chinese companies may be reacting to that and the media coverage over positive steps the government is taking to halt a slowdown.
Elsewhere, he notes how weak German PMI data has been a contrarian indicator in the past. “When PMI declines, industrial production accelerates over 50% of the time,” says Donovan, adding that investors have ignored regular upward revisions to that German data.
Donovan says investors need to put their focus on hard data around the globe, chiefly that which shows what’s really going on in the economy, such as spending plans by companies. For example, data from Japan showed corporate spending intentions are holding up, even if business confidence hit a two-year low.
The economist sees no meltdown for global growth this year, but just a coming back to a trend like rate, with the consumer holding up and supported by strong labor markets. “The main area of weakness is companies delaying or referring investment,” he said. “If we get the deal on U.S. and China trade then companies delaying investment will be more willing to invest.”
The market
Dow US:YMH9 S&P 500 US:ESH9 and Nasdaq US:NQH9 futures are powering ahead. Friday’s session and close to the quarter was a strong one, with Nasdaq COMP, +0.78% Dow DJIA, +0.82% and S&P 500 SPX, +0.67% all finishing higher. More coverage in Market Snapshot.
A risk-on mood is denting gold US:GCU8 US:GCU8 but lifting crude US:CLU8 while the dollar DXY, -0.16% is softer. The Turkish lira USDTRY, -0.8382% is down as Turkish President Recep Tayyip Erdogan’s ruling party has lost the capital Ankara in mayoral elections.
Europe stocks SXXP, +0.87% are higher, while China data left the Shanghai SHCOMP, +2.58% up 2.5% gain, and South Korea’s Kospi index SEU, +1.29% 1.3% higher.
The chart
Is the S&P on the cusp of a bullish breakout? Our chart of the day from Callum Thomas, head of research at Topdown Charts, has spotted a so-called golden cross for the index, which is a bullish chart pattern that occurs when the 50-day moving average moves above the 200-day. It generally points to a move higher for stocks.
Topdown Charts
That’s as last week, the index managed to hold the key 2,800 level, which is looking like a new floor/support for the S&P, says Thomas.
There’s more in Thomas’s weekly chartstorm of 10 market charts, which includes one that is slightly less bullish on the index.
The buzz
It looks like Tesla TSLA, +0.45% CEO Elon Musk spent the last weekend of the quarter goofing off, touting his rap song about a gorilla. But that may be good news for investors if he’s relaxed enough to no longer be stressing about last-minute auto deliveries.
Amazing work by Tesla Delivery teams, especially in Europe & China! Most insane logistics challenge I’ve ever seen. Thanks also to many country & city officials for your help this weekend! Super appreciated.
— Jung Musk (@elonmusk) March 30, 2019
China-U. S. trade talks will continue this week, with Chinese delegates due in Washington this week. Meanwhile, China’s State Council reportedly said it would hold off additional 25% tariffs on U.S. autos and auto parts, to help foster “good atmosphere for the ongoing trade negotiation.”
Those April 1 pranksters. Google GOOGL, +0.39% Nederland tried to pull a fast April 1 joke by announcing Google Tulip, an add-on to Google home that let’s humans talk to plants. @AprFoolsDay is staying on top of all the mischief.
Economy
It’s a big week for data, which will finish off with jobs numbers. Monday’s calendar is busy enough, with February retail sales, the final Markit PMI and the Institute for Supply Management manufacturing index, both for March. Construction spending and business inventories are also en route. Check out our economic preview here.
Read: Why the markets aren’t buying the Fed’s claims about the strength of the U.S. economy
The tweet
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