Surprise output rise aids stocks

AN UNEXPECTED surge in manufacturing growth in two of the world’s largest economies yesterday soothed fears over the prospects for the global economy.

The closely watched gauge of activity in US factories from the Institute for Supply Management defied expectations of a drop to jump to 56.3 last month from 55.5 in July, indicating the pace of output is beginning to pick up. China’s manufacturing sector also saw an unexpected recovery, after several months of slowdown, with the government’s purchasing managers’ index rising from 51.2 in July to 51.7 in August. A separate index compiled by HSBC bank rose from 49.4 to 51.9 rebuffing fears that government tightening measures would strangle growth.

Both surveys reassured that the slowdown in the economy was not gathering pace triggering a rally in stock markets worldwide. The Dow Jones Industrial Average soared 2.5 per cent to 10,269.47 marking its best day for eight weeks, while the FTSE 100 jumped 2.7 per cent to 5,366.41. European stocks markets also shared in the exuberance – with Paris and Germany both gaining over two per cent. “While conditions will continue to cool as the year progresses, there looks to be sufficient traction remaining to sustain the recovery,” said David Hensley, director of global economics co-ordination at JPMorgan.