Stocks resume rally on economy, oil gains

By Walter Brandimarte

NEW YORK (BestGrowthStock) – World stocks rallied in the first trading session of 2011 on Monday on stronger global manufacturing data, while oil closed at a 27-month high as the improved growth outlook increased demand expectations.

U.S. Treasuries prices fell as the manufacturing numbers — which followed positive U.S. economic data last week — suggested the world recovery continues to gain momentum, encouraging investors to take on more risk.

The Institute for Supply Management said U.S. manufacturing grew for a 17th straight month following news of faster growth in European manufacturing as well.

In another recent positive report, China’s factory inflation slowed in December, removing some pressure from the Chinese central bank to slow the economy.

The three main U.S. stock indexes jumped more than 0.8 percent on the data, back to September 2008 levels before the fall of Lehman Brothers. Asia was also headed to a positive start, with Japan’s Nikkei futures traded in Chicago rising 135 points to 10,365.

“There is a lot of money in cash, a lot of money in bonds that would like out of bonds. It’s only natural, with the economic improvement, it’s finding its way to equities,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

The big test for the U.S. economy comes on Friday, when the government will publish its widely watched nonfarm payrolls report.

The Dow Jones industrial average (.DJI: ) ended up 93.24 points, or 0.81 percent, at 11,670.75, while the Standard & Poor’s 500 Index (.SPX: ) jumped 14.25 points, or 1.13 percent, to 1,271.89. The Nasdaq Composite Index (.IXIC: ) closed up 38.65 points, or 1.46 percent, at 2,691.52.

In Europe, the FTSEurofirst 300 index (.FTEU3: ) of top stocks finished 0.95 percent higher at 1,132.30 on a broad rally, led by construction and industrial shares. Trading was thin, with markets closed in Britain and parts of Asia.

The MSCI All-Country World Index (.MIWD00000PUS: ) rose 0.67 percent, after finishing 2010 with gains of 10 percent, back to its strongest level since September 2008.

Emerging market stocks jumped 1.05 percent, according to another MSCI index (.MSCIEF: ).

Oil extended its rally on optimism the global economic recovery was gaining momentum. U.S. crude futures rose 17 cents to $91.55 a barrel, their highest close since October 3, 2008.

EURO STARTS LOWER

The euro started the first trading day of 2011 lower and analysts said it is likely to extend its downtrend as investors avoided the single currency due to nagging concerns about the euro-zone debt crisis.

“The euro is trading with a heavier tone. I think traders are trying to cut back their exposure on the euro as volumes normalize and given continued problems in the euro zone,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

The euro was down 0.13 percent at $1.3359 from a previous session close of $1.3377, after hitting a session low around $1.3251.

The dollar rose 0.19 percent against a basket of major currencies, according to the U.S. Dollar Index (.DXY: ). Against the Japanese yen, it gained 0.71 percent at 81.73.

Also supporting dollar gains was a rise in U.S. Treasury yields resulting from investors’ renewed appetite for risk.

The benchmark 10-year U.S. Treasury note lost 12/32 in price, sending its yield up to 3.3343 percent.

Gold prices closed 0.38 percent lower at $1,414.00.

(Additional reporting by Chuck Mikolajczak, Gertrude Chavez-Dreyfuss, and Emily Flitter in New York, Nigel Stephenson in London; Editing by Kenneth Barry and Dan Grebler)

Stocks resume rally on economy, oil gains