Strong manufacturing data out of China triggers spike in ASX futures

The S&P/ASX 200 index (XJO) came off a meagre two points on Monday, but at one stage it was as low as 5865 points, well below the 5926 close.

Strong leads from overseas last night, combined with particularly healthy manufacturing data coming out of China should see our market regain positive momentum today.

The Caixin China manufacturing purchasing managers index (PMI), a measure of China's manufacturing activity hit a nine-year high in July on the back of strong production.

Positive manufacturing data from one of the world’s largest industrial manufacturers would normally have a positive impact on commodity prices, and it appears from overnight movements that this has started to gain traction.

While we will discuss commodity price movements later, there was a particularly strong surge in the iron ore price and most base metals were up.

It is worth noting that China's main official manufacturing PMI, which is focused more on large state-owned companies, also hit a four-month high of 51.1 in July, up from 50.9 in June, a strong performance given that a level in excess of 50 is considered healthy.

The ASX SPI200 futures index is up 84 points to 5972 points, suggesting we are in for a strong day, quite likely led higher by our miners, remembering the gold price is still looking robust as it hovers in the vicinity of US$2000 per ounce.

24 hours

The Nikkei 225 rebounded strongly on Monday after falling steeply on Friday.

The index surged 2.2% or 485 points to close at 22,195 points.

The Shanghai Composite followed suit, gaining 1.7% to close at 3367 points.

The Hang Seng defied broader positive sentiment, shedding 137 points to close at 24,458 points.

European markets were particularly strong with the FTSE 100 gaining 135 points or 2.3% as it closed at 6032 points.

Germany was the biggest gainer as it rallied 2.7% or 333 points to close at 12,646 points.

The CAC 40 put on nearly 2% to close at 4875 points.

US markets were buoyed by a mix of anticipated economic stimulus measures and corporate activity within the tech sector which resulted in shares in Microsoft soaring 5.6%.

Looking across the indices, the NASDAQ once again stole the limelight, gaining 1.5% or 157 points to close at 10,902 points, an all-time record close.

The Dow surged 236 points or 0.9%, closing at 26,664 points.

The S&P 500 gained 0.7% to close at 3294 points.

Oil, gold, iron ore and base metals all up

The oil price is also often a beneficiary of a healthy manufacturing environment, and the Brent Crude Oil Continuous Contract pushed up from around US$43 per barrel to more than US$44 per barrel.

As we mentioned earlier, iron ore was a big gainer as it rallied 5% to US$116 per tonne.

The gold price came off slightly early in trading, but at 8AM this morning the gold continuous contract was trading at US$1993 per ounce.

On the base metals front, copper enjoyed a nice bounce as it passed US$2.93 per pound, leaving it just shy of a multi-year high.

There was also strong support for nickel as it hit US$6.28 per pound, a level it hasn’t traded at since the start of the year.

Lead is just shy of the four-month high of US$0.84 per pound struck in July.

There was little movement in the zinc price.

After falling nearly 1% to less than US$0.71 early in the session, the Australian dollar bounced back, recovering most of that lost ground, arguably in response to discussions surrounding stimulus measures in the US.

While global activity definitely points to a strong day for the ASX, there is a raft of domestic macroeconomic and industrial data to be released in the next 24 hours could have a significant impact on our market.

There will be a strong focus on retail sales data and the RBA policy statement today.

Information regarding home loans and home loan values will be released tomorrow, an accurate forward indicator of industry activity.