U.S. manufacturing activity expanded last month, rebounding from its lowest level since late 2016, according to data from the Institute for Supply Management. The Dow and S&P 500 jumped to their highs of the day on the data.
In China, the Caixin/Markit Manufacturing Purchasing Managers' Index jumped to 50.8 in March — its highest level in eight months — after economists polled by Refinitiv expected a print of 49.9. A number above 50 indicates expansion; a number below 50 shows contraction.
"But these positive developments mentioned above do not mean all risks have been resolved. A US-China trade deal has not yet been finalized and could still falter," said Adrian Zuercher, head of APAC asset allocation at UBS Global Wealth Management's Chief Investment Office. "China's government stimulus, while supportive, won't be of the magnitude of 2009 or 2015. The China earnings downgrade cycle, while slowing, is not yet complete."
Asian equities rose broadly on the data, with the Shanghai Composite surging 2.6 percent. Japan's Nikkei 225 and South Korea's Kospi indexes both rose more than 1 percent overnight. European stocks also climbed. The Stoxx 600 index closed 1.2 percent higher.
The figures gave some much-needed relief to investors unnerved of late by fears of a global economic downturn. Early last week, equities came under pressure as bond markets indicated an impending U.S. recession.
The yield on the 10-year Treasury note recently dipped below that of the 3-month bill, in what's known as a yield curve inversion. A yield curve inversion is seen as a trusted predictor of a recession. The spread widened on Monday, as the 10-year rose to 2.49 percent.
"The cycle is extended, and the inverted curve has made us even more alert for trouble in the economy and financial markets, but we do not think trouble is imminent," Doug Peta, chief U.S. investment strategist at BCA Research, said in a note. "We are not dismissing the inverted yield curve, but our other recession-indicator inputs are not confirming its warning. Given the Fed's new guidance, we expect that the next recession will not arrive before mid-to-late 2020."
Monday's gains came after the S&P 500 notched last week its best start to a year since 1998 and its strongest quarterly performance since 2009. The broad index gained 13.1 percent in the first quarter, led by the technology sector.