TORONTO — North American stock markets opened the second quarter higher Monday on unexpected manufacturing growth in China and positive data in the U.S.
Everybody was writing off China and stoking fears of a possible recession, but positive manufacturing data signals that forecasts of doom and gloom may have been misplaced, says Allan Small, senior investment adviser at HollisWealth.
"Well China data was good, so that rally looks like some of the initiatives that government is taking over there, some of the stimulus is kicking in," he said in an interview.
The monthly purchasing managers' index rose above 50 for the first time in several months, pointing to increased activity. An economic report out of China also showed growth in exports, employment and orders.
Positive news also came out of the United States, with manufacturers growing at a faster pace in March and construction spending increasing in February. However, retail sales fell in February.
"We're waiting for some more data this week and perhaps it's not as bad as people think, and if we can ever get a deal between the U.S. and China, I think this market goes higher," Small added.
Chinese and U.S. negotiations are set to resume in Washington this week after U.S. officials pointed to positive movement last week in Beijing.
The S&P/TSX composite index closed up 125.97 points to 16,228.06 Monday in the first day of trading in April and the second quarter.
Small said it's premature to say the second three months of 2019 will mirror the first three, which saw the Toronto market gain 12.4 per cent.
"You're looking historically at a pretty good month," he said of April.
"You never know what happens tomorrow but I'll take it today and enjoy it."
Seven of the market's 11 major sectors rose, led by consumer discretionary, along with the powerhouse energy, financials and industrials sectors.
Energy gained as the price of crude hit a near five-month high on hopeful signs of higher demand from China. Cenovus Energy Inc. rose 4.7 per cent on the day.
The May crude contract was up US$1.45 at US$61.59 per barrel and the May natural gas contract was up 4.6 cents at $2.71 per mmBTU.
Financials was up on a stabilizing yield curve after it inverted last week. Laurentian Bank, Toronto-Dominion and Canadian Imperial Bank of Commerce were up nearly two per cent.
Materials led on the downside as metals prices fell.
The June gold contract was down US$4.30 at US$1,294.20 an ounce and the May copper contract was down 1.1 cents at US$2.92 a pound.
The Canadian dollar traded at an average of 74.98 cents US, up from an average of 74.83 cents US on Friday.
In New York, the Dow Jones industrial average was up 329.74 points at 26,258.42. The S&P 500 index was up 32.79 points at 2,867.19, while the Nasdaq composite was up 99.59 points at 7,828.91.
Despite warnings about softer economic growth, Small sees markets improving with the right catalyst.
"I think the catalyst is going to have to come from something and I keep coming back to politics and trade."
Index and currency in this story: (TSX:CVE, TSX:LB, TSX:TD, TSX:CM, TSX:GSPTSE, TSX:CADUSD)