Stocks weren’t fooling around as they rallied to start the week thanks to strong manufacturing data from China and the US. The Dow went “Wow” and gained 329 points on heavy trading volume to close at 26,258. It was a nice start to the quarter.
The ISM manufacturing data for the US came in better than expected with a reading of 55.3 up from a reading of 54.2 and beating estimates which called for an increase to 54.5. Anything above a reading of 50 signals growth. The strongest component within the report came from labor which snapped a 3 month slide with its biggest gain in three years. The index of prices paid also climbed back above 50 signaling that costs are starting to tick up again thanks largely to rising crude oil prices. The report also showed that deliveries are happening faster and customer inventories rebounded from an eight year low indicating there is future potential for production growth.
China showed a surprise rebound in their manufacturing snapping a 4 month decline with a reading of 50.2 above estimates calling for a reading of 49.9. The report showed that efforts by the Chinese gubment to boost the economy might be paying off. Meanwhile on Sunday, China’s State Council said it would suspend additional tariffs on US autos and auto parts in a bid to strike a positive tone when trade negotiations with the US resume on Wednesday when a delegation led by Vice Premier Liu He comes to town.
Things in Germany however are not so good. The gurus had been looking for German manufacturing to stay flat at 44.7 (contraction territory) but the reading declined to 44.1. While I am speculating here, I attribute the success of Tesla taking sales from German car companies as one of the reasons behind the slowdown. Tesla has become the top selling small luxury car in the US and the company is now shipping cars to China and Europe as well. In March alone Tesla became the top selling EV in Norway with 31% market share. This could be an indication that Herr Musk is making inroads into the European continent and snagging sales in Germany’s back yard.