Stocks up on hopes for world economy
STOCKS rose for the second day to a three-week high on economic data that raised hopes the global economy might weather a recession in Europe this year.
STOCKS rose for the second day to a three-week high on economic data that raised hopes the global economy might weather a recession in Europe this year.The S&P/ASX 200 Index jumped 86.6 points, or2.1 per cent, to 4187.8 after a second night of big gains in Europe and after Wall Street began the year with its main indices up 1.5 per cent.A widely watched US index of manufacturing activity, the ISM index from the Institute for Supply Management, showed that the sector expanded at the fastest pace in six months last month. It came in at53.9 from 52.7 in November.Separate measures of production, employment, new orders and exports also jumped, as the first US economic data of the year underlined the resilience of the sector."The overall message of the report suggests durability ahead for US production in the face of likely external headwinds," said Citigroup economist Steve Weiting.As well, a measure of China's services industry climbed to the highest insix months. That followeda survey of China's manufacturing sector released on Monday that beat forecasts.Financial markets are looking for signs that growth in the US, and still-strong expansion in Asia, will prove enough to protect the world economy from any shocks that Europe may deliver in 2012.But given the scale of the crisis in Europe last year, there is still nervousness in the US that a protracted European recession will further erode demandas well as denting orders from Asia.City Index's Peter Escho said the pick-up on the Australian market was due to commodity prices "making up for their underperformance last year", but he cautioned that yesterday's sharp gains were unlikely to be sustained for long. "There's still a bit more negative earnings news to flow through the market," he said.The mining sector led the pack higher, moving up 3 per cent. BHP Billiton surged4.1 per cent to $36.22 while Rio Tinto climbed 2.9 per cent to $63.15, both closing at a three-week high.Energy stocks got an extra boost after US oil prices rose to their highest since May, fuelled by mounting concerns over a supply disruption from Iran. Santos put on 2.5 per cent to $12.65 and Woodside Petroleum climbed 2.3 per cent to $31.40.Even the financial sector managed to find some joy, gaining 1.8 per cent, despite concerns that the imminent rollover of $120 billion of debt in Europe could put pressure on banks' funding sources.