Euro, stocks up, global data support

NEW YORK: The euro and stocks advanced on Tuesday and US Treasuries fell as better-than-expected data in the United States and Europe spurred hopes for the global economy, even as Middle East tensions boosted oil prices.

The pace of growth in US manufacturing accelerated in December to its best month since June, while a sharp drop in German joblessness to the lowest in two decades boosted the euro and fueled stock market gains on both sides of the Atlantic.

Asian markets rose after data earlier in the global trading day showed that China's big manufacturers narrowly avoided a contraction in December, though downward risks persist. US stock indexes rallied sharply, hitting multi-month highs.

The Dow Jones industrial average climbed 1.96 percent and reached its highest since July as the Nasdaq Composite Index added 2.12 percent. The Standard & Poor's 500 Index gained 2.01 percent and notched its highest intraday level since late October.

Another report showed US construction spending surged to a near 1-1/2 year high in November. The data added to growing hopes that a recovery in the US economy, the world's largest, could be gaining steam.

"That we continue to make progress toward a full recovery is more important than any specific data," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

US Treasuries prices fell in thin trading as investors cashed in on year-end gains. The safe-haven appeal of US government debt diminished after the December factory report.

"I think it's important-this is a not-too-hot, not-too-cold (manufacturing) report," said Tom Porcelli, chief US economist with RBC Capital Markets in New York.

"We're not roaring ahead here but it's also not collapsing. That's consistent with our overall view of the economy in 2012."

Global stocks, as measured by the MSCI world equity index, rose 1.97 percent to hit a near one-month high. The euro jumped 1.03 percent against the US dollar to $1.3061

The single currency has struggled as the region's ongoing sovereign debt crisis stokes worries that the monetary union already is or could slip into recession.

Data showed German unemployment fell more than expected in December, with the jobless rate falling to the lowest since the unification of Germany.

Earlier, in China, Premier Wen Jiabao said the country will fine-tune monetary policy in 2012, suggesting the government will move to support growth in the world's second-biggest economy. ICE Brent crude futures climbed 3.03 percent on the first day of trading for 2012. US crude futures were up 3.38 percent.

Military exercises in the Gulf by Iran and the movement of US naval vessels in the area have raised fears of a confrontation between Tehran and Washington that could cut off oil exports from the region. Iran has said it could shut the Strait of Hormuz, through which 40 percent of world oil is shipped, if sanctions were to be imposed on its crude exports.

Copyright Reuters, 2011