European stocks up sharply on solid US manufacturing data

European stock markets rebounded sharply Monday as a solid US manufacturing survey offset poor data earlier which triggered fresh worries over the eurozone debt crisis. At the close in Europe, London's benchmark FTSE 100 index of top companies was up 1.85 percent at 5,874.89 points, Frankfurt's DAX 30 rose 1.58 percent to 7,056.65 points and in Paris the CAC 40 gained 1.14 percent to 3,462.91 points. Madrid finished with a gain of 0.43 percent while Milan, the sole loser on the day, shed just 0.16 percent, recovering from substantial early losses. In foreign exchange trading, the euro sank to $1.3327 from $1.3336 in New York late Friday and the dollar fell to 82.16 Japanese yen from 82.85 yen. In midday trade on Wall Street, the Dow Jones Industrial Average was up 0.14 percent, the broad-based S&P 500 rose 0.46 percent while the tech-rich Nasdaq climbed 0.43 percent. "Traders are digesting a plethora of global manufacturing releases," Charles Schwab analysts said. The day began on a sour note in both US and European sessions with sentiment hit by signs of weakness in the EU, where eurozone unemployment hit a record 10.8 percent in February. Eurozone manufacturing activity dropped to a three-month low in March, with the weakness spreading to top economies Germany and France, a key survey showed. The Purchasing Managers Index (PMI), a survey of 3,000 eurozone manufacturers compiled by Markit, fell to 47.7 points in March from 49 points in February. A score below the neutral 50 mark indicates contraction. "Not a good day for the eurozone economy, with news of another sharp overall rise in the number of jobless in February following on from the (PMI) confirming that manufacturing activity contracted at an increased rate in March," said IHS Global Insight economist Howard Archer. "It looks odds-on that eurozone GDP contracted again in the first quarter of 2012 after a drop of 0.3 percent quarter-on-quarter in the fourth quarter of 2011, thereby moving into recession. And the prospects for the second quarter of 2012 currently hardly look rosy." Better news from the United States then sparked an afternoon rally. US manufacturing accelerated in March, according to the ISM index, with the widely watched measure up from 52.4 percent in February to 53.5 percent in March. "ISM manufacturing survey data offer further encouraging news that the sector continued to expand at a robust pace at the end of the first quarter," said Chris Williamson, chief economist at Markit. Meanwhile, China said Sunday that manufacturing activity last month hit its highest level in a year, tempering recent concerns of a sharp slowdown in the world's number-two economy. However a separate survey by HSBC painted a less optimistic picture than the official figure. HSBC's PMI fell to 48.3 in March from 49.6 in February, marking the fifth month manufacturing activity has remained in contraction. Stock markets in Europe began on Monday with modest gains on the upbeat Chinese manufacturing data but they then sank into the red after the stream of negative eurozone data. Official figures showed that the eurozone unemployment rate hit a 15-year record high of 10.8 percent in February, up from 10.7 percent the previous month. Before the weekend, European markets were buoyed on Friday after eurozone finance ministers agreed to boost their firewall against another debt crisis to about 800 billion euros ($1.1 trillion). At the same time, Spain unveiled a tough austerity budget on Friday to produce savings of 27 billion euros in an effort to ease the strain on its public finances amid speculation Madrid could be the next to need a bailout. Asian markets were mixed on Monday as investors digested the Chinese manufacturing figures. Hong Kong shed 0.16 percent and Sydney slipped 0.14 percent, while Tokyo rose 0.26 percent and Seoul gained 0.76 percent. Shanghai was closed for a public holiday.