Stocks rise, oil rebounds as China data boosts virus-hit economy

LONDON (AFP) - European stock markets extended gains yesterday after a largely positive showing across Asia and as oil prices rebounded from 18-year lows, with a jump in Chinese factory activity providing a surprise boost for the virus-hit global economy.

Around midday, Europe’s main stock markets were up more than one percent on average.

The dollar was higher, while the euro came under pressure from data showing inflation in the eurozone fell in March on a slump in energy prices caused by the coronavirus outbreak.
“China provided Western investors with a light at the end of the tunnel,” said Connor Campbell, analyst at Spreadex trading group.

China’s manufacturing sector saw surprise growth in March, having been mauled in February as the country went into lockdown to 
tackle the virus.

China’s Purchasing Managers’ Index, a key gauge of factory activity, jumped to 52.0 from a record low 35.7 the month before. Anything above 50 is considered growth.
China is slowly returning to a semblance of normal life after months of tough restrictions which locked up millions of people at home and brought economic activity to a near standstill.
“Chinese factory data overnight gave a flicker of hope that the world’s second largest economy is firing back up, despite large parts of the world grinding to a halt,” said City Index analyst Fiona Cincotta.

However the World Bank has warned that fallout from the coronavirus pandemic could bring China’s growth to a standstill, with even a best-case scenario seeing expansion slow to 2.3 percent this year from 6.1 percent in 2019. Trillions of dollars pledged to offset the economic impact of the deadly virus have provided a semblance of stability to world markets, which were initially pummelled by the rapid spread of the disease, which has forced swathes of the planet - and the economy -- into lockdown.

While the number of infections and deaths continues to rise, observers said traders appear to be getting used to the new normal, with some suggesting the sell-off in stocks may have seen its worst.

After another rally on Wall Street, which saw all three main indices jump more than three percent Monday, Asia picked up the baton. Hong Kong climbed 1.9 percent while Mumbai and Manila climbed more than three percent yesterday.

Shanghai edged up 0.1 percent and Wellington added more than one percent.

But Sydney reversed early advances to end down two percent, having soared seven percent Monday on its best day in history. Tokyo finished 0.9 percent lower yesterday.

“As far as the coronavirus is concerned, China is the blueprint of what to expect, and once traders get the impression a country’s crisis is at or approaching the peak, then more bulls might be coaxed back into the market,” said David Madden at CMC Markets.

But there were warnings of a wave of desperately bad figures to come from around the world and Gorilla Trades strategist Ken Berman said stock markets continued to be hostage to uncertainty.

“The Volatility Index (VIX) has been closely tracking the major indices throughout the bounce, and without a meaningful decline in the ‘fear gauge’, the rally remains vulnerable,” he said ahead of key US jobs data this week.