Brussels: Stocks rose around the world on Tuesday as investors shrugged off signs of deteriorating economic sentiment in Europe and hoped the Federal Reserve would act to keep the US from sliding back into recession.
Trading is expected to remain volatile this week as investors await a key speech by US Federal Reserve Chairman Ben Bernanke during an annual economics conference in Wyoming on Friday.
The Fed already pledged to maintain its super-low interest rates until at least 2013 but some economists are calling for a third round of massive bond-buying to pump money into the faltering US economy.
European shares were up in afternoon trading, although less than in the early morning. Britain's FTSE 100 rose 0.6 per cent to 5,125. Germany's DAX gained 0.7 per cent to 5,512 and France's CAC-40 increased 0.9 per cent to 3,080.
Wall Street traders were also in a positive mood, with the Dow Jones Industrial Average opening 0.4 per cent higher at 10,976 and the broader S&P 500 adding 1.4 per cent higher at 1,139.
Economic indicators published Tuesday showed that failing efforts to resolve the eurozone debt crisis are cutting into economic activity and sentiment in the currency union's core.
Markit's composite purchasing managers index for the eurozone was unchanged at 51.1 in August, signaling stagnation in the manufacturing sector and hardly any growth in the services sector.
While analysts at Capital Economics had expected the index to deteriorate further from its 22-month low in July, they warned that "the index is still dangerously close to recession territory."
Output in Germany expanded at its weakest rate since the eurozone's largest economy began to recover two years ago, the index showed.
A key survey of economic sentiment brought more bad news out of Germany. The ZEW survey showed that investor expectations for the next six months are at their lowest level since December 2008, dropping to minus 37.6 points from minus 15.1 in July, below the indicator's historical average of 25.9 points.
Germany, which weathered the financial crisis much better than most other developed nations, has seen its stellar growth slow amid increased worries about the cost of bailing out weak eurozone nations.
Investors are getting more concerned about a second rescue package for Greece, as the currency union's 17 members remain locked in discussions about a Finnish deal to get cash collateral for its loan contributions. Similar requests from other nations could eat into the promised euro109 billion in loans and delay crucial changes to the eurozone's rescue fund.
Earlier in the day, Asian markets closed higher, tracing gains on Wall Street on Monday.
Japan's Nikkei 225 rose 1.2 per cent to close at 8,733.01 and Hong Kong's Hang Seng gained 2 per cent to 19,875.53. South Korea's Kospi jumped 3.9 per cent to 1,772.39.
Benchmarks in Singapore, Taiwan, India, Indonesia and the Philippines were also higher.
Chinese shares advanced for the first time in six trading sessions as investors sought bargains following the release of a survey suggesting better than expected manufacturing data for August.
The benchmark Shanghai Composite Index rose 1.5 per cent 2,554.02 and the Shenzhen Composite Index added 1.8 per cent to 1,144.05. Shares in cement and other building materials led the gains.
In commodities markets, oil prices traded close to $85 a barrel as traders scaled back expectations that Libyan oil would be quickly restored to world markets as fighting raged in Tripoli between rebels and forces loyal to Gaddafi.
Benchmark oil for September delivery was up 62 cents at $85.04 a barrel in electronic trading on the New York Mercantile Exchange. In London, Brent crude for October delivery was up 3 cents per barrel at $108.39 on the ICE Futures exchange.
Gold prices, meanwhile, fell 1.1 per cent to $1,870, after breaching $1,890 for the first time on Monday as investors moved their money into so-called save-haven assets.
The euro rose 0.3 per cent to $1.44, while the dollar weakened 0.5 per cent to 76.54 yen.
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