Coronavirus: Stocks rally as China data shows return to growth in key sector

Global stock markets are making further tentative gains on hopes the economic disruption from the coronavirus pandemic will be weaker than some estimates fear.

Investors bought in after data from China – the first country to be hit by COVID-19 – showed activity in its crucial manufacturing sector unexpectedly rebounded to growth in the month of March.

The country’s National Bureau of Statistics published purchasing managers’ figures which suggested factory activity expanded from a record low in February when much of its industry was shut down to limit the spread.

The non-manufacturing measure also showed a return to growth.

Despite concern over the accuracy of the figures, as analysts had expected to see a continued contraction, they suggested the Chinese economy was proving resilient in the face of the disruption.

However, demand in key foreign markets is far from assured as more countries enter lockdown conditions, with economists forecasting a recession deeper than the one seen during the financial crisis.

European stock markets followed Asia in giving a positive reaction to the China figures – with the FTSE 100 in London rising 2% in early trading before gains came off the boil by early afternoon.

It remains 25% down in the year to date, leaving the index on track for its worst quarter since 1987.

There were similar market movements in France and Germany while US futures shot up from negative territory.

Neil Wilson, chief markets analyst at Markets.com, wrote: “Asian shares were broadly higher as Chinese factory data improved as investors were encouraged by green shoots.

“The official manufacturing PMI rose to 52, ahead of the 45 forecast and well up from the coronavirus-impacted 35.7 in February, which was a record low.

“Two things about this number – it shows a bounce, which is encouraging, but it doesn’t show a massive bounce into the 60s, and can we really trust the number?

“Economic recovery will be uneven, and stock markets are unlikely to bounce back to where they were, yet the panic seems to be over.”

Tuesday saw a steady stream of listed companies continue to report on their fortunes.

The most significant came from Royal Dutch Shell, which said it was reacting to the dramatic slump in oil prices – that has seen Brent crude trade at 18-year lows – by slowing refining output to meet weaker demand.

The company said it was expecting to write down up to $800m in the first quarter as a result of the woes.

However, its shares rose 5% on hopes that promised talks between the US and Russia would result in a deal to end Saudi Arabia’s threatened price war with Moscow.

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