Markets surge on rising Chinese exports

Data showing a surge in China's exports in May lifted North American markets Thursday.

The Chinese customs agency confirmed a report that had been leaked to Reuters that shipments rose nearly 48.5 per cent while imports were up 48.3 per cent, for a surplus of $19.5 billion US.

That was more than most economists had forecast, but analysts warned that Europe's debt crisis is likely to hurt the recovery in trade. The 27-country European Union is China's biggest trading partner.

In Toronto, the S&P/TSX composite index gained 185.21 points, or 1.6 per cent, to close at 11,636. The Canadian dollar climbed 1.21 cents to 96.97 cents US.

The July crude contract on the New York Mercantile Exchange gained $1.10 to $75.48 US a barrel, boosted by data from the U.S. Department of Energy that crude inventories fell last week.

On American markets, the Dow Jones industrial average surged 273.28 points, or 2.8 per cent, to 10,172.53. The Nasdaq composite index was up 59.86 points, or 2.77 per cent, to 2,218.71 while the S&P 500 index rose 31.15 points, or three per cent, to 1,086.84.

Bullion prices fell further away from Tuesday's record high close, down $7.70 to $1,220.80 US an ounce.

Chinese exports back to pre-recession levels

Chinese exports have rebounded at least temporarily to their levels before the 2008 recession, hitting $131.7 billion in May, up from $120.5 billion in the same month two years ago.

"It's certainly encouraging. But there's always room for skepticism given the tepid recovery in global demand," said Royal Bank of Scotland economist Ben Simpfendorfer. "We may yet see a pullback in exports."

The May export surge might be a one-time spike as manufacturers rushed to ship goods ahead of the expected rise of the Chinese currency, the yuan, which would boost prices abroad, said Zhu Jianfang, chief macro analyst for Citic Securities in Beijing.

"We think May and June will be the high point of our trade this year," Zhu said. "We expect trade to slow in coming months."

The yuan has been frozen against the dollar since late 2008. Analysts expect the yuan to rise this year but say China's leaders will act only once it is clear global demand has recovered.

Exports to Europe were up 34.4 per cent in May from a year earlier while those to the United States rose 24.8 per cent. China's politically sensitive trade surplus with the United States was $16.7 billion.