US shares open higher

US stocks opened sharply higher today as better-than-expected Chinese and German data boosted optimism about the global economy after the S&P 500 index ended flat in 2011.

The Dow Jones industrial average gained 201.17 points, or 1.65 per cent, to 12,418.73. The Standard & Poor's 500 Index rose 22.01 points, or 1.75 per cent, to 1,279.61. The Nasdaq Composite Index climbed 54.85 points, or 2.11 per cent, to 2,660.00.

European stocks were higher early this afternoon, hitting a two-month high on sharp gains in cyclical mining shares, while simmering concerns over the euro zone crisis sent French and Spanish markets lower.

At 2pm, the Irish index of shares was up almost 1 per cent.

The FTSEurofirst 300 index of top European shares was up 0.7 per cent at 1,018.60 at 12.26pm, a level not seen
since late October. The euro zone's blue chip Euro Stoxx 50 index was flat at 2,369.87 following early gains, halted by resistance at 2,403, a peak hit in early December.

Spanish stocks dropped, with the IBEX down 1 per cent, as investors digested a comment from economy minister Luis de Guindos that Spain's public deficit for 2011 may be higher than the 8 per cent of GDP forecast by the new government.

That revived fears Spain could face a prolonged period of tight budgets and economic contraction.

"It shows that Spain is in a very tough situation and that the new government will have to beef up the austerity measures that have already been announced," said Arnaud Poutier, co-head of IG Markets France.

Sacyr was down 1.6 per cent, Banco de Sabadell down 1.3 per cent, and Banco Santander down 0.9 per cent.
France's Cac 40 also lost ground, hit by profit taking on big pharma Sanofi after a 22 per cent rally since late
November, as well as by a drop in top banking shares.

Société Génerale was down 2.7 per cent, Credit Agricole down 2.1 per cent, and BNP Paribas down 1.3 per cent as investors were quick to cash recent gains on the stocks with the end of the Christmas truce on the credit ratings front.

French banks have underperformed European pears over the past few months, hurt by worries France will lose its
triple-A rating.

"This year is going to be about geographical allocation: more on resilient Germany and UK, less of the weakest euro
zone countries, with Belgium increasingly looking like the next domino to fall," Agilis Gestion fund manager Arnaud
Scarpaci said.

In other countries, Germany's Dax index was up 1 per cent, boosted by sharp gains in carmakers such as BMW up 3.3 per cent, while Britain's FTSE 100 index was up 1.2 per cent, propelled by strong gains in miners such as Rio Tinto, up 5.6 per cent.

Europe will remain the focus of markets through at least the first quarter of 2012, JP Morgan Asset Management said in a note in which it continued to favour a defensive stance in European equities, targeting large market capitalisations with good dividend yields.

"If the theme for last year was 'muddle through', this year will be 'grind through', as the slow slog of budget cutting and reform dominates. Sceptical investors will need to see tenacity and commitment from governments before they return to buying non-risk-free sovereign debt," it said.

Reuters