Stock markets around the world shot higher yesterday on strong manufacturing data in the US and China that boosted investor confidence after recent losses.
On the currency market the dollar weakened, however, on news that the US private sector shed 10,000 jobs last month.
Asian stock market gains, powered by reports of robust Chinese manufacturing activity in July and August and better-than-expected second quarter Australian growth of 1.2 per cent, bolstered early European sentiment.
Tokyo rose 1.17 per cent, Sydney 2.08 per cent and Hong Kong 0.43 per cent.
Markets across Europe then rose sharply again in mid-afternoon deals after a report showed that manufacturing output in the US expanded for the 13th straight month in August.
The ISM index rose to 56.3 points from 55.5 in July, confounding forecasts for a fall to 52.9. “The ISM was the indicator everyone had been waiting for because what has preoccupied the markets lately has been the health of the US recovery,” said Guillaume Garabedian of Meeschaert Gestion Privee.
“It there is one index that gives an idea (on US growth) it’s the ISM.”
In London, the London FTSE 100 index added 2.70 per cent to close at 5,366.41 points while in Paris the CAC 40 jumped 3.81 per cent to 3,623.84. The Frankfurt DAX rose 2.68 per cent to 6,083.90 points.
Elsewhere there were gains of 3.22 per cent in Milan, 3.51 per cent in Madrid and 2.86 per cent in Amsterdam.
US investors turned the page on the worst August performance on Wall Street in nine years, with the Dow Jones Industrial Average up 2.33 per cent at 10,251.16 points by mid-day. The tech-heavy Nasdaq gained 2.84 per cent to 2,174.00.
“Following a dreadful month for equity markets, the first day of September has kicked off with strong gains across the board,” said GFT analyst David Morrison said.
But hanging ominously over the encouraging US manufacturing report was the disclosure that US private sector employment fell in August for the first time in seven months.
Payrolls firm ADP said 10,000 private-sector jobs were lost last month following a revised July increase of 37,000 jobs.
Most economists had expected 13,000 jobs to be created.
The weak data came ahead of the government’s monthly employment report due Friday, with most analysts forecasting non-farm payrolls to fall 118,000 in August and unemployment to edge up to 9.6 per cent from 9.5 per cent.