World markets gain on strong manufacturing reports

[June 01, 2009]  LONDON (AP) -- World stock markets rose strongly Monday after closely-watched manufacturing surveys reinforced hopes that the global economy may start to recover by the second half of the year.

In Europe, the FTSE 100 index of leading British shares was up 74.13 points, or 1.7 percent, at 4,492.07 while France's CAC-40 was up 81.58 points, or 2.5 percent, to 3,359.23. Germany's DAX surged 163.17 points, or 3.3 percent, to 5,103.99 though analysts said the gains may have been exaggerated by a public holiday.

Earlier in Asia, Japan's Nikkei 225 stock average, which has surged 37 percent since early March, closed up 155.25 points, or 1.6 percent, to 9,677.75, while Hong Kong's Hang Seng index shot up 4 percent to 18,888.59.

The bright start to the week was sparked by surveys in Europe and Asia showing that the manufacturing sector was on the mend if not quite in full recovery mode. A similar survey later from the U.S. is also expected to echo findings elsewhere.

In China, brokerage CLSA Asia-Pacific Markets said its monthly purchasing managers index -- a broad gauge of activity -- rose to 51.2 in May from April's 50.1. Anything above 50 indicates an expansion. The state-sanctioned China Federation of Logistics and Purchasing said its own PMI eased slightly to 53.1 from April's 53.5 but still showed activity expanding.

Meanwhile, data provider Markit found that its manufacturing purchasing managers' index for 16 countries that use the euro was revised up to a seven month high of 40.7 in May from the previous estimate of 40.5, while the Chartered Institute of Purchasing and Supply said its purchasing managers index for Britain rose for the third month running to 45.4 in May from 43.1 in April.

Later, analysts expect the Institute for Supply Management to report that its main purchasing managers' index rose to 42.0 in May from April's 40.1. Hopes of an even bigger rise have contributed to mounting optimism ahead of Wall Street's open. Dow futures were 125 points, or 1.5 percent, higher at 8,613 while the broader Standard & Poor's 500 futures rose 16.4 points, or 1.8 percent, to 934.50.

Economic news could well be the main driver this week, culminating in Friday's closely-watched U.S. non-farm payrolls report for May where investors will be looking to see if the recent better than expected U.S. economic data is being translated into more modest job losses.

The European Central Bank and the Bank of England also announce their latest interest rate decisions on Thursday. Though they are expected to keep their benchmark rates at 1 percent and 0.5 percent respectively, investors will be interested to see what the two banks say about the economic outlook.

"The event risks increase dramatically this week with central bank action and macro figures high on the agenda," said David Keeble, an analyst at Calyon Credit Agricole.

Despite a recent lull, stocks around the world have rallied strongly over the last few weeks, with some major indexes moving into positive territory for the year. The trigger for the gains has been better than expected economic news, particularly in the U.S., which has fueled an increase in appetite for risk on hopes that the global recession is receding. Stock markets usually start recovering between 6-9 months before an actual economic recovery emerges.

If this week's economic data disappoint and the banks paint a gloomier picture than many are predicting, then stocks could suffer, analysts said.

Monday's gains have come even though General Motors Corp. is about to file for bankruptcy protection.

It would be the largest industrial bankruptcy in American history and could dent U.S. consumer confidence. Washington will pump $30 billion into GM to help it stay afloat as it makes its way through bankruptcy court and develops a restructuring plan, U.S. officials said late Sunday.

Elsewhere in Asia, China's Shanghai benchmark surged 3.4 percent to 2,721.28 while South Korea's Kospi rose 19.21 points, or 1.4 percent, to 1,415.10. And Australia's index advanced 2 percent and Singapore's market climbed 2.2 percent.

The region's commodity stocks benefited from the sign of recovering demand from China as well as surging oil prices.

Crude prices extended recent gains to rise above $68 a barrel for a while. Benchmark crude for July delivery was up $1.56 to $67.87 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange.

In currencies, the dollar fell to 94.55 yen from 95.33 yen in late New York trading Friday. The euro rose to $1.4234 from $1.4152.

[Associated Press; By PAN PYLAS]

AP Business Writer Stephen Wright in Bangkok contributed to this report.

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