US economic hopes were buoyed overnight as the ISM manufacturing index rose by from 52.4 to 53.4. Across the sub-indices production jumped to from 55.3 to 58.3, the new orders balance dipped from 54.9 to 54.5 and the employment reading rose from 53.2 to 56.1, a 9-month high.
Meanwhile, US construction spending fell 1.1 per cent to an annual rate of $808.86 billion, a 7-month low. The result was well below forecasts which centred on a rise of 0.6 per cent. Spending in January was revised to show a much bigger 0.8 per cent fall instead of the previously reported 0.1 per cent dip.
European shares recorded a big daily gain, as investors focused on the upbeat manufacturing data from the US and China. The STOXX basic resources index rose 2.3 per cent. In London BHP Billiton gained 3 per cent while Rio Tinto rose 3.2 per cent. Eurozone banks were modestly weaker after media reports claimed that Germany's Bundesbank had stopped accepting the bonds of Portugal and other peripheral economies – the report was later denied. The FTSEurofirst 300 index rose 1.5 per cent, while the German Dax rose by 1.6 per cent on Friday and the UK FTSE rose 1.9 per cent.
On Wall Street, sharemarkets started the second quarter on a positive footing, following the relatively upbeat economic data. The S&P 500 lifted to a four-year high as energy and material stocks were once again in favour. At the close, the Dow Jones was up by 52 points or 0.4 per cent with the S&P 500 up by 0.8 per cent and the Nasdaq rose 28 points or 0.9 per cent.
US treasuries rallied on Monday (yields lower) as bargain hunters moved in following the Friday's sell-off. US 2-year yields were lower by 1 point to 0.33 per cent and US 10-year yields fell by 4 points to 2.18 per cent.
The greenback eased against commodity currencies on Monday, following the upbeat Chinese and US manufacturing data. However the euro eased against the US dollar as the eurozone PMI contracted for the eight straight month. The Euro fell from highs around $US1.3375 to near $US1.3275, and was close to $US1.3325 in late US trade. Meanwhile, the Aussie dollar rose from lows near US103.65 to highs around $US1.045 and was near $US1.042. And the Japanese yen strengthened from ¥83.00 per US dollar to ¥81.90 and was near ¥82.10 in late US trade.
In the commodities space, benchmark crude oil prices rose for a second straight session overnight. The upbeat ISM manufacturing data supported the bid for commodities. In addition, loading delays for North Sea crude cargoes added to concerns about global supply disruptions. The US Nymex rose by $US2.21 or 2.1 per cent to $US105.23 a barrel while London Brent crude rose by $US2.55 to $US125.43 a barrel.
Elsewhere in commodities, base metal prices were higher, with copper posting its biggest one-day gain in six weeks. The more upbeat Chinese manufacturing data eased traders concerns that China was slowing rapidly. Copper and Zinc both gained 2.4 per cent while Nickel rose 2.3 per cent. The gold price rose on Monday in line with other commodities and equities. The June Comex gold price was up by $US7.80 or 0.5 per cent to $US1,679.70 an ounce.
In Australia, retail trade figures are expected at 1130 AEST, while the Reserve Bank issues its interest rate decision at 0230 AEST. In the US, look out for factory orders, FOMC minutes and vehicle sales.
Craig James is CommSec's Chief Economist. Adam Carr is on leave. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.