LONDON/NEW YORK Manufacturing growth in India and China powered ahead last month and U.S. industry also picked up steam, according to data on Monday that suggested the global economic recovery may be on firmer footing.
Two surveys of Chinese executives showed broad-based strength in the manufacturing sector, helping to lift natural resource stocks and commodity prices as investors anticipated strong demand from the world's second-largest economy.
In the United States, where the Federal Reserve is widely
expected to announce this week that it will counter a sluggish economy by buying long-dated Treasury debt, the manufacturing sector unexpectedly grew at its fastest pace since May, according to the Institute for Supply Management.
"It is clear that stronger growth overseas and the weakening of the U.S. dollar has provided a significant boost to U.S. manufacturers," said Zach Pandl, an economist at Nomura Securities International in New York.
EYES ON THE FED
The Institute for Supply Management said its index of national factory activity rose to 56.9 in October from 54.4 in September. That was the highest since May and well above the 54.0 median forecast of 77 economists surveyed by Reuters.
A figure above 50 denotes expansion; a reading below 50 indicates contraction.
The survey showed that U.S. manufacturing generated many new orders from exports, with strong growth in autos and computers. The employment index also rose sharply.
Despite the surprisingly strong data, investors are in little doubt that the Fed is poised to inject more money into a struggling U.S. economy. The Fed will hold a policy meeting on Tuesday and Wednesday, with a statement expected after the meeting's conclusion on Wednesday afternoon.
The United States reported on Friday that its economy grew at a tepid annualized rate of 2.0 percent in the third quarter.
U.S. stocks rallied more than 1 percent after the ISM data but gave up some gains toward midday. U.S. investors are also focusing on midterm elections on Tuesday as well as the Fed's announcement the following day.
In early afternoon trading, the major U.S. stock indexes were up 0.1 percent to up 0.5 percent. The FTSEurofirst 300 index of pan-European shares .FTEU3 edged up 0.09 percent. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 1.9 percent.
CHINESE, INDIAN STRENGTH
China's official purchasing managers' index (PMI) rose to a six-month high in October of 54.7 from 53.8 in September, easily beating market forecasts of 52.9.
The strength of China's official PMI was especially striking because the index normally heads down in October, said Yu Song and Helen Qiao, economists at Goldman Sachs.
"The fact that the PMI went up despite this seasonal bias suggests real activity growth was likely to have been exceedingly strong in October," they said in a note.
The survey showed manufacturers continued to run down stocks last month to meet rising domestic orders.
"These readings bode well for a recovery of output in coming months," Ting Lu at Bank of America Merrill Lynch told clients.
A companion PMI produced by Markit for HSBC painted a similar picture, rising to 54.8 from 52.9 -- one of the largest month-on-month rises in the history of the survey.
Manufacturing in India -- Asia's other emerging powerhouse -- put in a performance every bit as strong as China's.
India's manufacturing was supported by strong domestic consumption. The HSBC Markit PMI for India, Asia's third-largest economy, rose to 57.2 in October from 55.1 in September.
Mirroring a report from Japan last Friday, South Korean manufacturing shrank for the second month in a row as the HSBC/Markit PMI fell to 46.75 in October -- the lowest since February 2009 -- from 48.8 in September.
EUROPEAN INDUSTRY YET TO DEBUT
An unexpected rise in Britain's manufacturing index to 54.9 will increase doubts that the Bank of England will soon embark on more quantitative easing. It followed official data last week that showed the UK economy grew at a surprisingly strong rate of 0.8 percent in the third quarter from the second.
Equivalent surveys from Europe are due on Tuesday, but Britain's PMI showed manufacturing growth picked up pace last month for the first time since March.
Flash October figures for Germany, released last month, also gave a strong reading although much of Europe remains mired in debt and poised to cut public spending to deal with it -- a move that will crimp economic growth going forward.