European markets up on strong manufacturing data

[August 02, 2010]  LONDON (AP) -- European stock markets rose Monday after another round of positive economic data, strong earnings from some of the region's biggest banks and expectations of a big rise on Wall Street at the open.

The FTSE 100 index of leading British shares was up 99.62 points, or 1.9 percent, at 5,357.64 while Germany's DAX rose 98.50 points, or 1.6 percent, to 6,246.47. The CAC-40 in France was 72 points, or 2 percent, higher at 3,715.14.

U.S. shares were also poised for a bright opening -- Dow futures were up 103 points, or 1 percent, at 10,520 while the broader Standard & Poor's 500 futures rose 12 points, or 1.1 percent, at 1,110.30.

Sentiment was buoyed by further evidence that the European economic recovery is gathering pace.

The monthly manufacturing purchasing managers' index for the 16 countries that use the euro -- a closely watched gauge of business activity -- was revised up to 56.7 in July from the previous estimate if 56.5. Anything above 50 means the sector is expanding.

That is another indication that the eurozone economy is recovering far stronger than most investors had thought earlier this year, when the government debt crisis was threatening the single currency zone.

As a result, the European Central Bank's president Jean-Claude Trichet is expected to sound a more confident tone when he has his press conference following the governing council's monthly rate-setting meeting.

The focus later will be on an equivalent survey in the U.S., which kicks off an important week on the U.S. economic news front -- Friday's non-farm payrolls data for July could well set the market tone for August, when trading activity usually drops off as investors take to the beach.

Last Friday's disappointing U.S. second-quarter GDP figures had provided further evidence that the U.S. economy was losing momentum -- the 2.4 percent annualized growth rate is not considered enough to lower unemployment.

David Jones, chief market strategist at IG Index, said the expected rise on Wall Street is an indication that investors have shaken off some of the gloom that gripped markets last week and that the Dow Jones index will once again try to get past the 10,600 level.

"This (level) has capped any rallies for the past six weeks and strength through here could give global stock markets a fresh impetus," said Jones.

The euro has benefited most from the seeming divergence between strong European economic data and weaker U.S. indicators. The 16-country currency has steadily climbed back above $1.30 and last week hit a three-month high of $1.3106.

Michael Hewson, an analyst at CMC Markets, noted that the U.S. dollar index has actually fallen for eight weeks in a row amid growing doubts about the U.S. economic recovery and renewed worries that the U.S. Federal Reserve will have to pump more money into the economy.

"Investors remain uncertain in the face of the conflicting signals being given by company earnings and recent U.S. economic data," said Hewson.

Aside from the economic data, investors in Europe were cheered by strong earnings from BNP Paribas SA and HSBC PLC, two of the region's biggest banks by deposits.

Earlier in Asia, stocks rose after weaker Chinese manufacturing data quelled fears Beijing might tighten controls to prevent overheating and upbeat Japanese earnings boosted trading sentiment.

Japan's benchmark Nikkei 225 stock average closed up 0.4 percent at 9,570.31, while China's Shanghai Composite Index advanced 1.3 percent to 2,672.52 after a survey by an industry group showed manufacturing growth slowed in July for a third month.

"There is no danger of overheating, which means the government will not have to tighten the screws," said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong.

Oil prices pushed up towards three-month highs, with benchmark crude for September delivery up 63 cents to $79.58 a barrel in electronic trading on the New York Mercantile Exchange.

[Associated Press; By PAN PYLAS]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.