* Strong U.S. manufacturing data drives stocks higher
* Bonds and dollar hurt by risk tolerance
* Investors less fearful on Greece's financial stance
(Updates with U.S. markets, changes byline, dateline, previous
LONDON)
By Manuela Badawy
NEW YORK, Feb 1 (Reuters) - World stocks recouped early
Monday losses, U.S. equities rose more than 1 percent and the
dollar fell after a measure of the U.S. manufacturing sector
hit its highest level since 2004 last month.
Risk tolerance was back again on investors' minds as the
the Institute for Supply Management index of U.S. factory
activity showed an unexpected rise, implying the economy was
out of recession and heading towards expansion. For more see
[].
The MSCI world equity index <.MIWD00000PUS> rose 0.68
percent after touching its weakest level since early November
earlier in the day. U.S. stocks rose around 1 percent, with the
Dow Jones industrial average <> up 0.92 percent at
10,159.60.
The U.S. dollar fell against the euro but rose against the
yen as investors bet global economic growth was picking up
pace. The euro <EUR=> was up 0.32 percent at $1.3906. Against
the yen, the dollar <JPY=> gained 0.42 percent at 90.68 yen.
"Manufacturing is strong but the key is that inventories
that drove fourth-quarter GDP (growth) up to (an annualized)
5.7 percent still has further to run in the early part of
2010," said Stephen Gallagher, Chief U.S. Economist at Societe
Generale in New York.
"A lot of this manufacturing surge that we are seeing is
really the result of business needing to replenish inventories
that had fallen so dramatically during the recession. It is
really telling me that the first half of 2010 is going to be
supported by the restocking," Gallagher added.
Crude oil prices <CLc1> were up more than 1 percent at
$73.71 a barrel boosted by the dollar's weakness versus the
euro and by the strong manufacturing sector data and consumer
spending rising, though by less than forecast. []
The ISM report followed strong manufacturing data from
China, Australia and the euro zone.
U.S. BONDS HURT
Markets showed limited initial reaction to U.S. President
Barack Obama's budget for fiscal 2011, which forecast a
record-high deficit of $1.56 trillion in 2010. []
Analysts said the figure was in line with expectations but
the report was short on details on how to increase revenues
while curbing federal projects, including space missions.
U.S. Treasury prices fell on the fast rate of manufacturing
growth as it rekindled worries about inflation and implied
lower demand for safe-haven bonds. U.S. bond investors were
less fearful that Greece would default on its debt.
Inflation concerns pushed prices on the 30-year Treasury
bond <US30YT=RR> down 1-7/32 to 96-28/32 after hitting a
session low of 96-23/32. Its yield, which moves inversely to
price, was 4.57 percent, up from 4.49 percent on Friday.
Benchmark 10-year notes <US10YT=RR> fell 18/32 in price to
yield 3.66 percent, up from Friday's closing 3.59 percent.
A deficit-cutting plan in Greece is ambitious but
achievable, the EU economic and monetary affairs commissioner
said on Monday, warning however that Athens may have to take
extra measures to shore up its finances. []
European shares closed higher on Monday with the
pan-European FTSEurofirst 300 <> index closing 0.6
percent higher at 1,018, rebounding from earlier losses.
(Reporting by Reuters bureaux worldwide; Editing by James
Dalgleish)
