Asian and European markets rose Monday as investors cheered data showing a surprise jump in Chinese factory activity, while oil prices rebounded from last week's sharp losses after Iraq said top producers could announce a cut in output this week.
But while the week started on a positive note, worries about trade were revived by China's Global Times newspaper saying Beijing wanted all US tariffs rolled back as part of a mini deal, a move observers said Washington is unlikely to agree to.
China said on Saturday that its manufacturing sector expanded in November for the first time in seven months, providing a much-needed boost to investors looking for signs of optimism in the world's number-two economy.
Another survey Monday of smaller firms also showed a better-than-expected pick-up in factory activity.
"Investors are taking any signs of an end to the economic gloom, especially in China, as a reason to buy shares that benefit from stronger growth," said analyst Jasper Lawler at London Capital Group.
The news comes as Beijing and Washington put the final touches to a partial trade deal, the expected passage of which has helped global markets rally for weeks.
- 'Very bitter trade pill' -
Some analysts raised concerns about an article in the Communist Party-linked Global Times, which tweeted that the government wants levies imposed on China to be removed as the US talks continue. It also said leaders wanted tariffs lined up for December 15 to be taken off the table.
But OANDA senior market analyst Jeffrey Halley said: "It is hard to see the U.S. swallowing a very bitter trade pill like that; it would, in effect, remove all of the U.S.' leverage in the far more difficult comprehensive trade negotiations to come."
"It is now becoming more apparent why the talks have dragged on so long."
There was little immediate reaction on markets to news that China had slapped punitive measures on the U.S. in retaliation for its backing of a pro-democracy movement in Hong Kong, announcing sanctions on NGOs and suspending visits by U.S. warships and aircraft.
On oil markets, both main contracts rallied after Iraq said Sunday that OPEC and other major producers would consider slashing output by 400,000 barrels a day to support prices when they meet in Vienna this week.
The gains reversed some of the huge losses suffered Friday after reports said Russia was looking to delay any further output reductions until April's gathering.
- Key figures around 1145 GMT -
London - FTSE 100: UP 0.3 percent at 7,365.06 points
Frankfurt - DAX 30: UP 0.3 percent at 13,270.85
Paris - CAC 40: FLAT at 5,902.76
EURO STOXX 50: UP 0.1 percent at 3,707.20
Tokyo - Nikkei 225: UP 1.0 percent at 23,529.50 (close)
Hong Kong - Hang Seng: UP 0.4 percent at 26,444.72 (close)
Shanghai - Composite: UP 0.1 percent at 2,875.81 (close)
New York - Dow: DOWN 0.4 percent at 28,051.41 (close)
Euro/dollar: DOWN at $1.1016 from $1.1018
Pound/dollar: DOWN at $1.2909 from $1.2925
Euro/pound: UP at 85.34 pence from 85.24
Dollar/yen: UP at 109.64 from 109.49 yen
Brent North Sea crude: UP 2.5 percent at $61.98 per barrel
West Texas Intermediate: UP 2.5 percent at $56.52 per barrel
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