World stocks advance despite weak US economic data

LONDON—World stock markets rose Tuesday as the new year's cautious optimism held amid relatively positive corporate news, particularly from the struggling British retailing sector, and despite some dismal U.S. economic data.

The escalation of the natural gas dispute between Ukraine and Russia -- which has shut off deliveries to several countries and helped push the price of oil briefly back above $50 a barrel -- failed to dent the upbeat tone evident in markets so far in 2009.

On Wall Street, the Dow Jones industrial average ended up 62.21 points, or 0.7 percent, at 9,015.10. The broader Standard & Poor's 500 index rose 7.25 points, or 0.8 percent, at 934.70, its highest close in two months.

Both indexes had been sharply higher at the opening bell, with the Dow up more than 100 points at one point, but the news that U.S. factory orders slumped by 4.6 percent in November -- nearly double the 2.5 percent drop economists expected -- prompted a modest retreat.

In Europe, the FTSE 100 index of leading British shares closed up 59.28 points, or 1.3 percent, at 4,638.92, while Germany's DAX rose 42.32 points, or 0.9 percent, to 5,026.31. France's CAC-40 rose 36.30 points, or 1.1 percent, to 3,396.22.

In Britain, the FTSE was buoyed by retailers after some better-than-expected sales updates. Though Next PLC and Debenhams PLC reported falling sales over the crucial Christmas-New Year sales period, investors were relieved that their drops were not as bad as many had feared. Next shares rose 12 percent, while others like Marks & Spencer PLC, which releases its Christmas update on Wednesday, rose 4 percent.

"Next's statement was particularly warmly received as there were no nasty shocks," said Richard Hunter, a strategist at Hargreaves Lansdown stockbrokers in London.

In Germany, the DAX was lifted by confirmation that luxury carmaker Porsche AG had raised its stake in Volkswagen AG to over 50 percent. Volkswagen saw its share price rise around 9 percent.

Stock markets have kicked off the new year in sprightly fashion, partly on relief that 2008 is past and optimism that an expected near $800 billion package of tax cuts and government spending from the incoming Obama administration may limit the length and depth of the recession in the U.S.

Nevertheless, investors remain fully aware that the economic gloom will hang around for a long time to come. A raft of economic news later this week, most notably Friday's U.S. jobs report for December, will likely challenge markets.

"While investors say they are braced for choppy conditions, they may yet lose their nerve at those times when the going gets rough," said Stephen Lewis, an analyst at Monument Securities.

"The early-year rally in equities is unlikely to run far," he added.

Rising oil and metal prices -- along with jumps in overseas stocks -- prompted gains in commodity-rich Latin America. Brazilian shares extended their 2009 rally, with the Ibovespa index gaining 1.9 percent to 794. Argentina's Merval jumped 5.4 percent to 1,214, while Chile's IPSA added 2.5 percent to 2,504. Mexico was the only major regional market to buck the upturn, ending down 1 percent at 23,055.

Earlier in Asia, Japan's Nikkei 225 stock average rose 37.72 points, or 0.4 percent, to 9,080.84 as a weaker yen boosted exporters like Sony Corp. and Canon Inc. Sony jumped over 7 percent, while Canon was up 5 percent. Meanwhile, Toyota Motor Corp. added over 1 percent despite announcing it was halting production at all 12 of its Japanese plants for 11 days over February and March.

Elsewhere in Asia, the Shanghai Composite Index rose 3 percent to 1,937.15, while South Korea's Kospi rose 1.8 percent and Australia's key benchmark added 1.5 percent. Hong Kong was the only major regional market to fall, with the Hang Seng index down 53.80 points, or 0.4 percent, at 15,509.51 points.

Oil prices fell Tuesday as fresh signs of a deepening U.S. recession trumped tensions in the Middle East and worries over natural gas shortages in Europe. Light, sweet crude for February delivery fell 23 cents to $48.58 a barrel in trading on the New York Mercantile Exchange.

Prices early on reached $50.47, the highest point since Dec. 1, before the release of the weak U.S. econommic data.

In currency trading, the euro dropped to a low of $1.3312 in European trading before recovering to $1.3523 late in New York, compared with $1.3602 late Monday. The dollar rose to 94.01 Japanese yen from 93.21 yen late Monday, after hitting 94.64 yen earlier, its strongest level since Dec. 1. The British pound rose to $1.4939 from $1.4723.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.