Britain's FTSE leads stock markets higher

[January 04, 2011]  LONDON (AP) -- The FTSE 100 index of leading British shares outperformed its peers Tuesday, leading European shares higher as traders played catch-up following a belated New Year return.

Oil company BP PLC made sizable gains following reports that rival Royal Dutch Shell considered a bid for a company when it was mired in its Gulf of Mexico woes last year.

Stock markets have started 2011 buoyantly in the wake of a run of upbeat economic data from around the globe.

In Europe, Germany's DAX was up 19.01 points, or 0.3 percent, at 7,008.75 while the CAC-40 in France rose 26.51 points, or 0.7 percent, to 3,927.37.

The advance in London was even more dramatic, with the FTSE 100 up 136.95 points, or 2.3 percent, at 6,036.89. Monday was a public holiday in Britain, on a day when most of the world's leading indexes posted big gains following positive manufacturing data.

The data flow will be heavy all week, culminating in Friday's closely-watched U.S. nonfarm payrolls report for December -- the figures often set the stock market tone for a week or two after their release. The growing hope in the markets is that they will confirm that the world's largest economy is starting to generate more jobs as the pace of the economic recovery picks up.

"Overall however there's definitely an air of optimism about the global economic outlook now," said Ben Potter, market strategist at IG Markets.

Oil company BP was the top best blue-chip performer of the day, rising over 5 percent to 490 pence, its highest level since the end of May last year and before the height of the Gulf of Mexico oil spill.

Tuesday's perky BP performance came after a report in the Daily Mail newspaper suggested that Shell considered a bid for the company during the crisis, which sent BP's share price crashing and its market value down to below 60 billion pounds, compared to its usual value over the last few years of over 100 billion pounds.

The upbeat mood in stock markets is set to continue when Wall Street opens later -- Dow futures were up 44 points at 11,629 while the broader Standard & Poor's 500 futures rose 3.4 points to 1,267.56.

Stocks in New York got a boost Monday after a survey from the Institute for Supply Management showed manufacturing activity in the U.S. spiked to a six-month high in December.

Optimism over the pace of the U.S. recovery has increased over the past few weeks following an agreement between the White House and Congress to extend tax cuts for all Americans and amid growing signs that the labor market is on the turn.

The hope is that Friday's nonfarm payrolls data will show that unemployment is on the way down.

Earlier in Asia, Japan's Nikkei 225 stock average closed up 1.7 percent at a seven-month high of 10,398.10, while South Korea's Kospi advanced 0.7 percent to 2,085.14 and Hong Kong's Hang Seng index added 1 percent to 23,668.48.

Chinese shares ended higher in robust trade on the first trading day in 2011, mainly led by property and financial shares. The benchmark Shanghai Composite Index rose 44.57 points, or 1.6 percent, to 2,852.65. The Shenzhen Composite Index for China's smaller, second market was up 1.6 percent to 1,311.33.

In the currency markets, the supposedly-embattled euro continued its perky start to the year after figures showed inflation in the 16 countries that used the currency at the end of 2010 running at its highest level for over two years and above the European Central Bank's target of keeping price rises "close to, but below" 2 percent.

Eurostat, the EU's statistics office, said Tuesday that consumer prices jumped 2.2 percent in the year to December, up from November's 1.9 percent rate, and ahead of analysts' expectations for a more modest increase to 2 percent.

By early afternoon London time, the euro was up 0.2 percent at $1.3384.

The euro has been further supported by declines in the market borrowing costs of many of the currency bloc's highly-indebted countries.

The prevailing view in the markets following last year's bailouts of Greece and Ireland is that Europe may be able to support Portugal but that a rescue of Spain would test the limits of the existing bailout fund, potentially putting the euro project itself in jeopardy if governments don't put up more cash. Spain accounts for around 10 percent of the eurozone economy, compared with the Greece, Ireland and Portugal, which account for around 2 percent each.

The dollar was faring better against the Japanese yen, trading 0.6 percent higher at 82.14 yen.

Traders will be keeping a close watch on developments surrounding the Japanese currency. Analysts believe that if the yen's recent rally continues, then Japan's monetary authorities may decide to intervene in the markets by buying dollars and selling yen. In September, that's exactly what the Bank of Japan did for the first time in six years.

The yen often benefits at the end of a year as Japanese companies repatriate assets back home for financing reasons.

Oil prices advanced too as the economic optimism improved -- benchmark oil for February delivery rose 44 cents to $91.99 a barrel midday Singapore time in electronic trading on the New York Mercantile Exchange.

[Associated Press; By PAN PYLAS]

AP Business Writer Yuri Kageyama in Tokyo contributed to this story.

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