Solid manufacturing data in Europe and the US saw markets rise overnight, as investors await the outcome of this week’s Federal Reserve meeting.
The Dow Jones rebounded off its worst week in months, closing up 0.8 per cent to 15,885 points.
The S&P 500 gained 0.7 per cent to 1,787 points.
Official data from the Federal Reserve revealed US manufacturing output rose for a fourth straight month, up 0.6 per cent in November, as production increased almost across all sectors.
US industrial production rose 1.1 per cent during the month, which was its strongest monthly gain this year.
A 3.4 per cent rebound in auto production accounted for a large portion of the increase, but there were gains in other industries, including fabricated metals, textiles and furniture and electrical equipment.
When added to the solid retail sales and employment reports from last week, it has strengthened the case for the Federal Reserve to start reducing its $US85 billion per month stimulus program.
The US Federal Open Market Committee, which sets monetary policy and the stimulus program, meets tonight and tomorrow night Australian time.
It will make an announcement at 6am (AEDT) Thursday morning on whether its cutting stimulus, and if not, it should give further guidance on when it will.
Across the Atlantic, Germany’s DAX led a market rebound, rising 1.7 per cent to 9,164 points a result of its own firm manufacturing data.
The leading PMI index by Markit shows German manufacturing activity rose from 52.7 to 54.2, which is much higher than expected.
Germany’s private sector expanded for the eighth month in a row in December.
NAB economist Spiros Papadopoulos says the data is good for the region.
“The recovery in Germany points to euro zone GDP growth in the fourth quarter being around 0.2 per cent, which would leave the weak recovery trend intact,” he said.
Germany has led the European recovery this year.
The DAX index is up around 20 per cent since the start of the year.
The data showed a widening divergence in the performance between France and Germany.
The PMI figures show manufacturing activity in France fell to a seven-month low.
The CAC index in France still added 1.5 per cent to 4,119 points, while and London’s FTSE 100 added 1.3 per cent to 6,522 points.
The Australian dollar was slightly weaker than the previous evening, buying 89.43 US cents.
On commodity markets, West Texas Crude oil rose slightly overnight to $US97.25 a barrel and Singapore’s Tapis crude was also higher at $US115.70
The spot gold price recovered to $US1,239.10 an ounce.