Rising US manufacturing output last month and a surge in eurozone business activity in December lifted global equity markets yesterday, while gains in new orders from purchasing managers in Europe boosted the euro against the dollar.

Brent crude oil rose more than one per cent on expectations of rising demand from the stronger-than-expected European economic data, while supplies remained cut off from Libya.

American manufacturing output rose 0.6 per cent in November, a fourth straight gain, as production increased almost across the board, the latest sign the US economy is gaining steam.

Manufacturing combined with a jump in mining and utilities output to boost industrial production 1.1 per cent, the largest increase since November 2012, the Federal Reserve said.

US equities posted their worst week in nearly four months last week, a pullback sparked by concerns the Fed may begin to wind down its stimulus programme at a two-day meeting of policymakers that ends tomorrow.

“Signs of the recovery are becoming increasingly evident, and the taper could actually be seen as a good thing – a sign of economic normalisation – should the Fed pull the trigger this week,” said Brad McMillan, chief investment officer at Commonwealth Financial Network in Waltham, Massachusetts.

In Europe, Markit’s Flash Eurozone Composite Purchasing Managers’ Index, a regional gauge of business activity across thousands of companies large and small, rose to 52.1 in December from 51.7 last month. New orders rose for a fifth month, suggesting the recovery should continue into 2014.

European shares rose more than one per cent, while the Dow and the Nasdaq also rose that much before paring some gains.

“It’s the stronger economic data showing that tapering won’t have as dramatic an impact on the economy as first thought,” said Alan Lancz, president, Alan B. Lancz & Associates Inc, an investment advisory firm in Toledo, Ohio.

The steady spate of strong economic data has helped ease fear in the market that an eventual Fed move to scale back its bond purchases would harm the economic recovery, Lancz said.

MSCI’s all-country world stock index rose 0.60 per cent, while the FTSEurofirst 300 closed up 1.26 per cent at 1,258.31.

The eurozone’s blue-chip Euro STOXX 50 index jumped 1.95 per cent to 2,978.77.

Gains in German blue-chips added the most to the FTSEurofirst, as Germany’s benchmark DAX rose 1.7 per cent. Germany has led the euro zone recovery this year, with the DAX up 20 per cent so far in 2013.

On Wall Street, the Dow Jones industrial average rose 143.40 points, or 0.91 per cent, at 15,898.76.

The Standard & Poor’s 500 Index was up 12.05 points, or 0.68 per cent, at 1,787.37.

The Nasdaq Composite Index was up 29.45 points, or 0.74 per cent, at 4,030.43.

The euro edged higher against the dollar on the eurozone data showing rising business activity, while uncertainty over the Fed’s bond-buying kept investors wary of the greenback.

Market participants have started to price in the possibility of a small reduction in the Fed’s bond purchases, resulting in a stronger dollar trend last week.

But Vassili Serebriakov, currency strategist at BNP Paribas in New York, said much of the dollar buying had already taken place last week. Fed policymakers meet today and tomorrow.

“There’s no reason to buy the dollar ahead of the Fed decision and so this is just position adjustment,” Serebriakov said, adding that BNP expects the Fed to start scaling back its asset purchases in March next year.

The euro rose just shy of $1.38 on Markit’s composite eurozone report and on German manufacturing activity, both of which beat forecasts in December.

Brent futures rose toward $111 a barrel on Monday. Supply concerns revived after Libya failed to reach a deal with tribal leaders to end the blockade of several oil-exporting ports. Brent crude for January rose $1.69 to $110.52, while US crude oil for January delivery rose 89 cents to $97.49 per barrel.

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