Shares, euro rise on U.S. manufacturing

Mon Oct 1, 2012 4:25pm EDT
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By Wanfeng Zhou

NEW YORK (Reuters) - Stocks in major markets rallied on Monday after a survey showed the U.S. manufacturing sector expanded last month for the first time since May and as the results of Spain's bank stress test drove gains in European financial shares.

The euro rose from a three-week low against the dollar after the U.S. data dented demand for safe-haven assets. But U.S. Treasuries prices managed to gain, supported by bond-buying by the Federal Reserve.

The Institute for Supply Management, an industry group, reported that its index of U.S. factory activity rose to 51.5 in September. It was the first time since May that the index topped the 50 threshold that indicates expansion in the sector.

"Numerically, that is a pretty small amount," said Peter Jankovskis, co-chief investment officer at Oakbrook Investments in Lisle, Illinois. "But in terms of looking at the number, it's the difference between seeing contraction and seeing growth. So psychologically that's pretty important."

Federal Reserve Chairman Ben Bernanke said on Monday the U.S. central bank did not foresee a recession but that growth was too slow to bring down the nation's jobless rate. His comments did not move markets.

Earlier on Monday, surveys showed factory output in Europe and Asia wilted again last month, indicating that the euro zone has sunk back into recession and providing more evidence that China's economy suffered a seventh straight quarter of slowing growth.

"Despite a recent spate of weaker-than-expected data from across the world, markets are looking forward. There is a lot of hope that the worst-case scenario is off the table not only for now, but for good," said Adam Sarhan, chief executive of Sarhan Capital in New York.

Wall Street stocks rose after closing out their best third quarter since 2010 on Friday.   Continued...

Traders are pictured at their desks in front of the DAX board at the Frankfurt stock exchange September 28, 2012. REUTERS/Remote/Marte Kiessling