China manufacturing strength bolsters world shares

Equities and commodities including copper gained after reports showing better-than-expected improvement in manufacturing in China and Europe, bolstering optimism about the outlook for the global economy.

HSBC's purchasing managers' index for China rose to 50.1 last month, while a survey by the China Federation of Logistics and Purchasing showed manufacturing climbed to 51 in August from 50.3 in July.

"The data shows the Chinese economy is on a track to regain strength, and that should be reflected in higher demand for metals," Commerzbank analyst Daniel Briesemann told Reuters.

More good news came in the form of the final reading of Markit's euro-zone manufacturing index as it rose to 51.4 in August, surpassing expectations as growth improved in Germany, the Netherlands, Italy, Austria and Ireland.

"Manufacturing in the euro area continued to show signs of recovery in August," said Chris Williamson, chief economist at Markit, in a statement. "Although gains are still only modest, companies reported the strongest improvement in business conditions for just over two years, with a pick-up in new orders growth suggesting the upturn will be sustained into September."

Europe's Stoxx 600 Index climbed 1.9 per cent from the previous close. The UK's FTSE 100 Index advanced 1.5 per cent, Germany's DAX rose 1.7 per cent, while France's CAC 40 strengthened 1.8 per cent.

US markets were closed for the Labor Day holiday.

Futures rose, with those on the Dow Jones Industrial Average up 0.7 per cent, the Standard & Poor's 500 Index up 1 per cent, and the Nasdaq Composite Index up 1.2 per cent.

"A short-term lift in business-cycle indicators in China is dampening market scepticism short term, so risk appetite is revived as we are heading into a week of vital importance for the direction of equities," Witold Bahrke, who helps oversee US$55 billion as a senior strategist at PFA Pension in Copenhagen, told Bloomberg News.

Vodafone shares climbed 3.4 per cent as Verizon Communications agreed to pay it US$130 billion to buy Vodafone's 45 per cent stake in Verizon Wireless, one of the biggest deals in history.

Shareholders of Vodafone are set to receive US$84 billion of cash and shares, the company said, when the transaction is completed which is expected to be in the first quarter of 2014.

Investors are waiting for a flood of economic reports this week which will culminate in the August US payrolls report. If the report confirms that the US jobs market recovery is gathering momentum, then it increases the chances the Federal Reserve will begin to taper its current US$85 billion a month of asset purchases.