European markets in solid start to 2010

LONDON: World stock markets mostly kicked off 2010 with modest gains on the year's first trading day Monday after encouraging manufacturing data reinforced hopes that an economic recovery is gathering pace.

The FTSE 100 index of leading British shares was up 39.22 points, or 0.7 percent, at 5,452.10 while Germany's DAX rose 38.49 points, or 0.7 percent, to 5,995.92. The CAC-40 in France was 44.16 points, or 1.1 percent, higher at 3,980.49.

The gains came after surveys pointed to a further pickup in manufacturing activity in December. The monthly purchasing managers' index — a key gauge of activity — for the 16 countries that use the euro rose to a 21-month high of 51.6, while the equivalent survey for Britain rose to a 25-month high of 54.1.

A figure above 50 indicates expansion, and the bigger the difference the faster the expansion.

Wall Street was poised to recoup some of the losses it posted on New Year's Eve — Dow futures were 58 points, or 0.6 percent, at 10,423 while the broader Standard & Poor's 500 futures up 6.5 points, or 0.6 percent, at 1,117.20.

There are a number of key economic releases this week. In Europe, investors will have a raft of data to digest including the first estimate of inflation in the eurozone from December as well retail sales and unemployment.

Meanwhile, in the U.S., the calendar kicks into gear later with the closely watched manufacturing survey from the Institute for Supply Management. But most attention will center on Friday's nonfarm payrolls data for December and many in the markets expect the first job creation in two years — the jobs data often set the stock market tone for a week or two.

The likely key driver to stock market performance this year will be whether the economic figures back up the optimism that is evident in company valuations following a nine month bull run.

Stock markets around the world rallied strongly since March's lows — the Dow and the S&P 500 for example surged more than 60 percent since then — as investors grew more optimistic about the global economic recovery after central banks and governments pushed through extraordinary policy measures to mitigate the deepest recession since World War II.

It's also a busy week on the central bank front. Several speeches are expected from U.S. Federal Reserve officials. In addition, the minutes to the December rate-setting meeting will be published Wednesday.

In addition, the Bank of England decides on interest rates on Thursday — most observers think the Bank will keep its benchmark interest rate unchanged at 0.5 percent and wait until February before deciding if a further expansion of the money supply is merited.

Earlier, most markets in Asia rose after a strong Chinese manufacturing survey — one of the reasons why the world economy has managed to recover from recession sooner than many people were expecting was because Chinese economic growth largely held up.

"The flow of economic data right around the world has been positive today, starting with China which posted its fastest rate for manufacturing output last month in five years," said David Buik, markets analyst at BGC Partners.

In Tokyo, the Nikkei 225 stock average advanced 108.35 points, or 1 percent, to 10,654.79, with Japan Airlines surging 31 percent after the government said it was readying additional financing to the troubled airline.

South Korea's Kospi added 0.8 percent to 1,696.14. Australia's main index was up 0.1 percent and India's benchmark gained 0.5 percent.

Other markets slipped, with Hong Kong's Hang Seng off 0.2 percent at 21,823.28 and Shanghai's index down 1 percent to 3,243.76. Singapore's market lost 0.1 percent.

Oil prices rose, with benchmark crude for February delivery up $1.56 at $80.92

The dollar fell 0.1 percent to 92.89 yen while the euro rose 0.5 percent to $1.4389.

As in the stock markets, most interest this week in the currency markets will hinge on Friday's U.S. jobs data.

"A disappointing print might be the catalyst for a reversal of the recent moves up in yields and the dollar," said Hans Redeker, global head of foreign exchange strategy at BNP Paribas.