What's going on?

Investors can keep believin�: new manufacturing data on Monday showed that both China and Europe�s factories are doing better than expected. Investors took it as a signal that the economy�s growth will go on, and on, and on, and on�

What does this mean?

The manufacturing sector�s smelt of cheap perfume lately: the US-China trade war has hit factories in both China and Europe (which supplies many Chinese manufacturers with components). But the latest data�s bucked that trend � in November, the Chinese manufacturing sector expanded the most in three years, beating economists� expectations.


Manufacturing activity is still shrinking over in Europe, meanwhile � but it�s doing so more slowly than investors expected. Some will win, some will lose: job losses continued for their seventh straight month in Europe, and business confidence in China fell.

Why should I care?

For markets: Payin’ anything to roll the dice.

Investors appeared to take Monday�s news as an indication the economy might be doing alright. Those who�d expected a slowdown and bought relatively safe assets, like government bonds and gold, initially sold them off on Monday. Instead, investors boarded the midnight train to Asia, where they bought stocks. Several investors think economic growth will pick up next year, so are increasing the riskiness of their portfolios by buying stocks in the hope of higher returns.

The bigger picture: Livin� in a lonely world.

One place where investors didn�t gain confidence was the US, where manufacturing data in November was worse than expected. And matters were made worse by tweets from the US president, who announced on Monday he was reimposing tariffs on steel from Brazil and Argentina (tweet this). Both countries have benefited from the US-China trade war since China, reticent to buy from the US, has started buying agricultural products from its southern neighbors instead. Optimistic investors be warned: forecasts of an economic recovery rest on easing trade tensions, but a single tweet can put paid to that�