Investors hope equity rally continues
EUROPEAN stocks gained the most in almost two weeks as investors speculated that last year's rally in equities will continue in 2011 amid expanding corporate profits and economic growth.
The Dublin and London stock exchanges were closed for the New Year bank holiday, putting the focus squarely on mainland Europe as traders looked to get 2011 off to a good start on a day of relatively light trading.
National benchmark indices rose in 15 out of the 16 western European markets that were open. France's CAC 40 gained 2.5pc, while Germany's DAX advanced 1.1pc and Switzerland's SMI Index added 0.9pc. The Stoxx Europe 600 Index rose 0.7pc, the biggest gain since December 21.
"As we enter the new year, there is an apparent bullish bias among equity investors," said Ian Scott and Shanthi Nair, London-based strategists at Nomura Holdings.
"Valuation and likely further expansion in earnings in 2011 also suggest that the market is underpinned."
Stocks climbed as a report showed Europe's manufacturing industry grew more than initially estimated in December, powered by Germany's export-led expansion. A gauge of manufacturing in the euro area rose to 57.1 during the month, the initial estimate had been 56.8.
Motoring stocks had a strong day, led by Porsche which jumped 15pc as a US judge dismissed claims against the carmaker for more than $2bn (€1.49bn) while Volkswagen added more than 4pc. BMW rose 2.7pc. Fiat Industrial began trading in Milan as the split from Fiat became effective yesterday.
In Paris, Lagardere surged 9pc as France's biggest publisher said it is in talks to sell its international magazine business. Advertising giant JCDecaux advanced 2.4pc.
Construction stocks were the second-best performers in Europe yesterday, led by Saint-Gobain after Europe's biggest supplier of building materials completed the sale of its Advanced Ceramics business for $245m on December 31. The shares rose 3.4pc in Paris.
In Asia stocks rose on light volumes. Japan, Australia, New Zealand and China were all closed.
The MSCI Asia Pacific excluding Japan climbed 0.9pc with three-quarters of stocks ending the day in positive territory.
Foxconn International the world's biggest contract maker of mobile phones, which hit the headlines in the west after several suicides among staff, gained 5pc in Hong Kong.
"In the US, not just the employment market is improving, but other areas, such as corporate earnings and manufacturing, are looking pretty strong," said Chris Leung, a fund manager at Haitong International Asset Management in Hong Kong. "For the second half of this year, we're pretty bullish."