PMI rebound helps drive markets higher

• Chinese PMI rebound helps lift global economic outlook
• UK manufacturing moves into expansion, lifting the FTSE 100
• US dollar hits four-month high amid uncertain Fed easing outlook

The FTSE 100 leads the way in early trade this morning, with European indices on the front-foot after an extended weekend. That long break saw the Chinese release some encouraging PMI data, with both manufacturing (50.8) and services (53.0) now both firmly in expansion territory. With the Chinese composite PMI (52.7) rising to the highest figure since last May, traders are growing increasingly confident in a China-led economic rebound this year. With that in mind-it comes as no surprise to see crude prices push above $84 for the first time in six-months.

The positive PMI theme has continued to signal a welcome resurgence for manufacturing, with yesterday’s US ISM manufacturing PMI surge acting as a precursor to similar gains in Europe today. While traders had few expectations ahead of today’s final PMI surveys, we have seen France, Germany, the eurozone and UK all revise their manufacturing figures higher for March. Most notably, the UK enjoyed a surprise rebound back into expansion territory, with increased output and new orders helping to bring the first expansion in manufacturing activity since July 2022. Given concerns around the delays for Federal Reserve monetary easing, the gains seen across European indices of late do highlight a growing fondness for the relatively cheap European indices over their comparatively pricey US counterparts.

Friday’s US core PCE release brought some respite from recent inflation concerns, with the downward revision to the January reading helping to ease some of the fears over the difficulty faced in driving this metric back down to target. Nonetheless, the relative strength of the US economy has clearly stifled disinflationary pressures compared with most other major economies, with this week’s jobs data likely to further highlight the continued resilience in the face of elevated interest rates. Coming off the back of four consecutive payrolls beats, this week’s data looks unlikely to put pressure on the Federal Reserve to act anytime soon. The prospect of a more patient Federal Reserve brings expectations of further upside for the greenback, with the dollar index having breached 105 to hit a fresh four-month high this morning. That dollar strength appears to be coming at the detriment of crypto, with Bitcoin tumbling back towards $66,000 ahead of this month’s halving event. However, precious metals have really shined, with Gold and Silver pushing sharply higher as we move within two-months of the expected June kick-off for ECB, BoE, and Fed easing.