Upbeat manufacturing data from the United States and China helped European shares record their biggest daily gain in three weeks on Monday as leading indexes posted a bullish start to the second quarter. The pan-European FTSEurofirst 300 index closed 1.5 percent higher at 1,085.04 points, sending a bullish technical signal as it powered through three resistance levels to close above the 50 percent retracement of the March 17-29 move.
The index moved decisively to the upside in afternoon trade after data showed the US manufacturing sector grew more than expected in March, reassuring investors about the state of the world's largest economy after some lacklustre numbers recently, including lower-than-expected factory orders last week.
The US data came after China's official Purchasing Managers' Index, published on Sunday, hit an 11-month high, allaying concerns about a slowdown in the world's second-largest economy and largest consumer of commodities. The Stoxx 600 Basic Resources share index rose 2.3 percent, with UK-listed miners Fresnillo, Rio Tinto and BHP Billiton up between 3 percent and 4 percent.
The sector had fallen nearly 15 percent in the previous nine weeks, weighed by concerns about economic growth in China, compared with a 3.1 percent rise for the pan-European Stoxx 600 index. "The only cyclical which did not participate (in the recent rally) was basic resources which was by far the worst performer during March," Deutsche Bank said in a note advising fund managers on positions to take into the new month.
The bank's views were shared by David Coombs, head of multi-manager investments at Rathbone Brothers, who believed miners should be bought on weakness, betting global economic recovery was not far off. "We believe in a cyclical recovery in the States and that China, whilst it will slow, will not suddenly stop being an engine of growth," Coombs said.
French construction groups Vinci and Saint Gobain , which generate a large part of their sales in Europe, closed down 0.6 and 0.5 percent, respectively. Domestically focused car makers were also in the red, with France's Peugeot and Renault down 3.3 percent and 1.3 percent, respectively, after data showed French new car registrations fell for a fifth consecutive month year-on-year in March.
Italy's Fiat were weighed down by chief executive Sergio Marchionne's comment on Friday that he expected the Italian car market to fall more than expected in 2012, and called March figures, due out later on Monday, "horrible". Euro zone banks also underperformed, closing 0.1 percent lower on the back of media reports, later denied, that Germany's Bundesbank had stopped accepting the bonds of Portugal and other peripheral countries as collateral.
That capped gains on the euro zone blue chips Euro Stoxx 50 index, which ended the day 1 percent higher at 2,501.18, and was poised to rise further after a recent consolidation, charts showed. Broker Cheuvreux said it expected the index, which has traded within an uptrend channel since October, to rally again towards the 2,650-2,675 window, provided that it did not break below a key resistance level at 2,375.