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U.S. and European
stocks resumed their rally in the first trading session of 2011 on
Monday on stronger global manufacturing data, while oil rose as the
outlook for growth increased optimism about demand.

U.S. Treasuries
prices fell as the data – including a pickup in U.S. manufacturing
growth last month – suggested the economic recovery continues to gain
momentum, encouraging investors to take on more risk.

The Institute for
Supply Management said U.S. manufacturing grew for a 17th straight
month, following news of faster growth in European manufacturing as
well.

In another recent
positive report, China’s factory inflation slowed in December, removing
some pressure from the Chinese Central Bank to slow down the economy.

The three main U.S. stock indexes jumped more than 1 percent on Monday following the data.

“There is a lot of money in cash, a lot of money in bonds that would like out of bonds.

It’s only natural,
with the economic improvement, it’s finding its way to equities,” said
Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

The big test for the U.S. economy lies on Friday when the government will publish its widely watched nonfarm payrolls report.

The Dow Jones
industrial average, DJI, jumped 124.19 points, or 1.07 percent, to
11,701.70, while the Standard & Poor’s 500 Index .SPX rose 16.98
points, or 1.35 percent, to 1,274.62. The Nasdaq Composite Index, IXIC,
gained 49.31 points, or 1.86 percent, to 2,702.18.

In Europe, the
FTSEurofirst 300 index, FTEU3, of top stocks unofficially closed 0.9
per cent higher at 1,131.59 on a broad rally, led by construction and
industrial shares. Trading was thin, with markets closed in Britain and
parts of Asia.

The MSCI
All-Country World Index, MIWD00000PUS, rose 0.9 percent, after
finishing 2010 with gains of 10 percent, back to its strongest level
since September 2008.

Emerging market stocks jumped 1.3 percent, according to another MSCI index, MSCIEF.

Oil extended its
rally on optimism the global economic recovery was gaining momentum.
U.S. crude futures CLc1 rose 0.8 percent to $92.11 a barrel.

Euro starts lower

Worries about the
euro-zone debt crisis weighed on the euro. The euro started the first
trading day of 2011 lower and analysts said it is likely to extend its
downtrend as investors avoid the single currency due to nagging
concerns about the euro-zone debt crisis.

“The euro is
trading with a heavier tone. I think traders are trying to cut back
their exposure on the euro as volumes normalise and given continued
problems in the euro zone,” said Omer Esiner, chief market analyst at
Commonwealth Foreign Exchange in Washington.

The euro EUR= was
down 0.12 percent at $1.3361 from a previous session close of $1.3377,
after hitting a session low around $1.3251.

The dollar rose
0.15 percent against a basket of major currencies, according to the
U.S. Dollar Index .DXY. Against the Japanese yen, the dollar JPY= was
up 0.63 percent at 81.66.

Also supporting dollar gains was a rise in U.S. Treasury yields resulting from investors’ renewed appetite for risk.

The benchmark
10-year U.S. Treasury note US10YT=RR was down 22/32 in price, sending
its yield up to 3.3712 percent. Gold prices held steady.

Reuters