Markets gain on new year optimism

Investors have returned to the markets with a positive outlook

New year optimism on the financial markets, together with rising commodity prices, has nudged share indexes higher on the first day of trading of 2010.

The FTSE 100 index hit a fresh 16-month high, at 5,500, while France's Cac 40 and Germany's Dax indexes were ahead.

In Tokyo the Nikkei 225 reached a 15-month high, while in the US the Dow Jones was up 1.3% in early trading.

The continued rise in commodity prices meant mining companies were among the biggest gainers.

On the FTSE, Eurasian Natural Resources was ahead by 4.92% at close, while Vedanta Resources was ahead by 4.79%.

Shares in partly-nationalised Royal Bank of Scotland rose 9.9%, helped by a rating upgrade to "outperform" fromanalysts at Exane BNP Paribas.

Metals continued their recent rallies, with copper prices reaching a 17-month high on Monday on the back of industrial action in Chile.

Meanwhile, the Dax market in Frankfurt ended the day 1.53% ahead, and the Cac index in Paris closed up 1.97%.

Oil companies also benefitted as world oil prices broke through $80 a barrel earlier before falling back slightly.

BP and Shell both saw big rises on the FTSE, while in New York ExxonMobil and Chevron were also up in early trading.

Manufacturing boost

Positive economic data from China, Europe and the US also added to the optimistic mood.

In China, manufacturing data showed the sector growing by the biggest margin in five years, while UK manufacturing saw the fastest pace of growth in two years.

The flow of economic data right around the world has been positive today, starting with China David Buik, market analyst at BGC Partners China manufacturing growth boost UK factory activity 'accelerates'

That picture was echoed in the US, where data from the Institute for Supply Management showed that the manufacturing sector grew for the fifth straight month in December, and at the fastest pace for more than three years.

David Buik, market analyst at BGC Partners, said: "The flow of economic data right around the world has been positive today, starting with China which posted its fastest rate for manufacturing output last month in five years."

Kit Juckes, chief economist at ECU Group, said the positive economic mood would likely spill over into further stock market gains in the early part of the year.

But, he warned that this optimism may mean the world's central banks no longer feel they need to support the system so generously and begin to tighten interest rates. "This is where the outlook (for stock markets) gets trickier," he said.