Shares jump on Greek debt, global economy hopes

Feb 1, 2012, 16:47 GMT

Frankfurt - European shares were ending the trading day Wednesday at their highest level since the eurozone debt crisis triggered a major shakeout in world stock markets in August.

This came amid reports that Greece was close to a debt deal with private lenders to stave off default, along with raised expectations about the global economic outlook.

A series of key reports released this week showed the sentiment in the manufacturing sector around the world gaining momentum as it entered the new year.

This in turn has also helped to underpin investor confidence with shares around the world bounding into the new year.

'Global manufacturing seems to be fending off the negative influences of austerity plans and banking sector deleveraging. And for now, that looks as if it will last,' said ING Bank economist Rob Carnell.

As the trading came to an end on Wednesday, bourses in London and Paris were up 1.8 per cent while Frankfurt had gained 2.4 per cent as stocks built on the solid gains chalked up in recent days.

Europe's benchmark Stoxx 600 index is now up more than 6 per cent since the start of the year.

Analysts said investors have also been cheered by European leaders signing off on an accord Monday for budget discipline in the 17-member eurozone.

In the meantime, across the Atlantic on Wall Street shares were up more than 1 per cent after about 2 hours of trading.

Purchasing managers indexes (PMI), measuring the purchases of goods and services in the manufacturing sector, picked up in the world's leading economies in January amid hopes that the risks posed to global growth by the eurozone debt crisis might be receding.

The US Institute for Supply Management (ISM) followed up the release of PMI's for the 17-member eurozone, Germany, China and Britain with a report showing the mood in industry in the world's biggest economy gaining ground this month.

The ISM said the PMI for US industry rose from 53.1 points in December to 54.1 in January.

Still, the increase fell short of the gain to 54.5 forecast by economists. The ISM also revised down the December reading from a previously estimated 53.9 points. A reading above 50 signals growth.

Nevertheless, the series of PMI's will add to hopes that the world economy remains on a growth path.

In China - the world's second biggest economy - the PMI edged up for the second consecutive month to 50.5 in January from 50.3 in December.

This was followed by the London-based Markit group saying the PMI for the eurozone's manufacturing sector rose to within striking distance of the key 50-point mark.

'Euro area manufacturing has started 2012 surprisingly well, suggesting the region may avoid a slide back into recession,' said Markit's chief economist Chris Williamson.

The PMI for the currency bloc climbed to 48.8 this month from 46.9 in December, helped along by a further pickup in the region's biggest economy, Germany. The PMI for Germany hit a six-month high of 51 in January.

At the same time, Britain's manufacturing sector returned to a growth track.

Signs also emerged from Japan this week that the industrial sector in the world's third biggest economy might also be gaining traction after a tumultuous economic year following the catastrophic earthquake and tsunami that hit the country in March.

Official data released on Tuesday showed industrial output in Japan rebounded in December by 4 per cent from a 2.7-per-cent drop in November. Analysts had expected a more modest 2.8-per-cent rise.