European markets rallied and the FTSE 100 hit its highest level in 2016 after a sharp rebound in Chinese exports eased fears over the state of the global economy.
The FTSE closed up 120.5 points or 1.9% at 6,362.89, the highest level since 2 December. Germany’s DAX rose 2.7% and the French CAC closed up 3.3%.
Investors were cheered by a bigger-than-expected jump in demand for China-made goods, which fuelled hopes that the world’s second largest economy was in better shape than feared.
Chinese exports returned to growth for the first time in nine months, up 11.5% in March compared with a year earlier. It was the biggest rise since February 2015 and followed a 25% fall in February when Chinese new year celebrations disrupted trade.
Mining companies were among the top FTSE risers on hopes that demand for commodities such as iron ore, copper and zinc would rise on the back of stronger demand in China.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “The last two months have seen a turnaround in fortunes for the UK stock market, after a miserable start to the year. Strong performance from oil and mining shares has been the key driver of the rebound in the Footsie, on the back of a recovery in commodity prices.”
Brent crude oil dipped slightly but remained above $44 a barrel.
Jasper Lawler, analyst at CMC Markets, said: “The apparent turnaround in China’s economy, the rise in oil prices as well as a more cautious Federal Reserve have removed the major concerns that led to the beginning of the year sell-off.”
Markets shrugged off a surprise fall in US retail sales and a warning from the International Monetary Fund about the possibility of a fresh global financial crisis.
Mark Williams and Marcel Thieliant at Capital Economics said the trade data suggested fears about the Chinese economy were overdone.
“[It] adds to growing evidence that the extreme gloom of a few weeks ago about the state of the domestic economy was misplaced,” they wrote in a note.
Despite the rebound in exports, China’s trade surplus – exports minus imports – was the lowest in a year, at $29.9bn, after imports fell by a smaller-than-expected 7.6%.
Figures to be published on Friday are expected to show growth in China slowed in the first quarter.
Tim Condon, ING’s Asia chief economist, said a bounce in Chinese exports in March was not enough to rescue a poor first quarter.
“Forget exports. Support for growth will have to come from domestic spending. 2016 is shaping up to be the worst year for China’s exports since 2009 and could be an even worse year for imports.
“Policy has turned more accommodative in 2016 and the January-February activity data contained hopeful signs that it’s bearing fruit. We think those signs are a sufficient reason for the authorities to stay the course.”
The Chinese government is targeting economic growth of 6.5% to 7% this year. The economy grew by 6.9% in 2015, the slowest rate in a quarter of a century.
