U.S Stocks Poised to Rebound on News of Shaky Global Recoveries

And they’re off! The bulls went on a tear through global markets this week, as investors reacted to good news from China and Europe. First, the not-so-surprising news: manufacturing in China climbed to its highest mark since April of last year, according to the government’s purchasing manager’s index (PMI). But the real croissant-dropper came out of factories in the Eurozone. Manufacturing output climbed at its fastest pace in more than two years — and not just from the usual suspects (read: Germany), but also long-ailing Italy and Spain. Even Greece registered a slight uptick in manufacturing, raising hopes that the steady drip of bad news will become less of a drip. “Finally,” says Frederic Neumann, co-head of asia economic research at HSBC, in reaction to the good news out of the Eurozone. “With an exclamation point.” Still, he and other analysts caution that the market rally is in reaction to very tentative developments at a time when investors are starved for something positive.  “The market is much more sensitive to market data and sentimental swings,” says Kelvin Lau, a senior economist at Standard Chartered Bank. (MORE: The End Of Cheap Labor in China) A lot of unknowns are casting a long shadow over the bright patch. For instance, manufacturing may be a leading indicator of wider economic growth, but as Leland Miller, CEO of the China Beige Book, warns, one sector does not an economy make, particularly an economy as vast and opaque as China’s. “You never know how much of the rebound in the PMI is due to legitimate things, like a surge in global demand and actual growth, and how much is due to China’s government greasing the wheels,” he says. Public officials can juice the numbers by pumping yuan into select companies and infrastructure projects. Indeed, most of China’s rebound seems to be concentrated in areas that are direct beneficiaries of government spending, notes Standard Chartered’s Lau. The question is whether money is being spent on the right projects. Recent news of the break-up of the country’s

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