European bourses end at 15-month high

European shares rose to a 15-month high in a broad rally on Monday, the first trading day of 2010, helped by upbeat economic data and with banks among the major gainers.

The FTSEurofirst 300 .FTEU3 index of top European shares rose 1.4 percent to end at 1,060.73 points, the highest closing level since early October 2008.

The heavyweight banking sector added most to the index.

Part-nationalized Royal Bank of Scotland rose 9.9 percent, helped by a rating upgrade to 'outperform' from Exane BNP Paribas analysts and hopes of rekindled investor interest.

BNP Paribas, Banco Santander, Credit Suisse, HSBC and UBS rose 1.8-4.6 percent.

Bank of Ireland and Allied Irish Banks rose 15.1 and 12.5 percent respectively, amid optimism on their funding positions.

"It's not surprising that the market has got off to a relatively strong start to the year," said Graham Secker, equity strategist at Morgan Stanley.

"A lot of people derisked in the last month, both the investment banks and the hedge funds. People are going back in. It does look like the economic recovery is gathering pace."

Many analysts have said equities may fall once governments withdraw stimulus packages brought in to combat recession.

"We don't think the sweet spot will last too long for equities," said Secker.

The index rose 25.7 percent in 2009 but in doing so regained less than a third of the points it lost in 2008. It has surged more than 64 percent since hitting a record low in March 2009.

Economic data confirmed a pattern of worldwide recovery.

The U.S. manufacturing sector grew for a fifth consecutive month in December, with an index of activity hitting its highest level since April 2006, according to an industry report released on Monday.

A survey showed manufacturing activity in the euro zone expanded at its fastest rate in 21 months in December, but new orders growth slowed slightly.

Across Europe, Britain's FTSE 100 ended the day 1.6 percent higher; France's CAC40 and Germany's DAX  rose 1.5 and 2 percent respectively.

Wall Street was higher around the time European bourses were closing. The Dow Jones, S&P 500 .SPX and Nasdaq Composite were up 1.5-1.7 percent.

Energy companies on both sides of the Atlantic gained as crude prices rose more than 2 percent to top $81 a barrel. Prices were boosted by Russia halting oil supplies to Belarus and by cold weather.

Total, BP, BG, Royal Dutch Shell and StatoilHydro rose 1.8-3.5 percent.

Cairn Energy rose 6.7 percent after saying it had secured a second drilling rig for an exploration program in Greenland.

Crude prices were further helped by the weaker dollar, which also boosted the price of metals. Copper hit a 16-month peak.

- Reuters