THE Dublin market got the first session of the year off to a strong start with the ISEQ finishing the day showing a 4.13pc gain -- up 122.83 points at 3097.76.
Markets had already been given a boost by overnight news that China's manufacturing industry expanded in December at the fastest rate in 20 months.
In Dublin, banks and leading industrials were to the fore. Relief was evident in the market's reaction to Finance Minister Brian Lenihan's address to the nation -- it sent bank shares flying, with AIB up 12.5pc to €13.50 and Bank of Ireland 15pc ahead at €1.52. Irish Life & Permanent got in on the act with a gain of over 6pc.
The enthusiasm for bank stocks was related to a belief that NAMA is safe and set to get under way in the coming weeks.
Davy Stockbrokers said government economic policy, combined with stimulus packages, would help to sustain economic recovery in the first half of this year. "Together with the impact of aggressive cost-cutting measures, this will result in decent earnings growth in 2010," the broker said, adding that the outlook for equities in 2010 "is reasonably positive".
Its top 10 stock picks include CRH, Smurfit and Ryanair. Kerry, Glanbia and C&C made the grade for their "defensive" qualities, while the other Dublin listed picks are Paddy Power and Irish Life & Permanent.
Most of these enjoyed some support yesterday, but Ryanair up by 7pc, Smurfit 6pc and Kerry 5.6pc stood out from the pack.
The FTSE 100 Index broke through the 5500 barrier for the first time in 16 months in a jubilant start to new year trading. Economic optimism and signs of a return in takeover activity sent the FTSE 100 Index soaring 1.6pc to close 87.5 points higher at 5500.3 -- a level not seen since before the Lehman Brothers collapse in September 2008.
On the London market, commodity-based stocks continued to show strength after their festive rally thanks to oil prices ticking above $81 a barrel.
The Footsie's strong session reflected hopes of a revival in merger-and-acquisition activity, following a multi-billion dollar move by Basel-based drugs firm Novartis for the Alcon eyecare business majority-owned by Nestle.
In a quiet session for major corporate news, Royal Bank of Scotland was the leader after Exane BNP Paribas changed its rating from "neutral" to "outperform". The broker said it expected progress on asset disposals in the coming quarters and predicted that better economic conditions should attract investors on a fundamental rather than speculative basis.
RBS was up 2.9p to 32.1p, while Lloyds Banking Group lifted 3pc, or 1.57p, to 52.26p.
Oil and gas firm Cairn Energy was another top riser after securing a second rig for its Greenland drilling programme. Shares rose 22.4p to 355p.