Tower and foodmaker Goodman Fielder led the NZX 50 Index higher, after the Reserve Bank kept interest rates on hold and the local bourse got a lift from a global rally spurred by optimism about Europe's debt crisis. 

The NZX 50 Index rose 0.6 per cent shortly after opening, and by midday was up 16.11 points, or 0.5 per cent, at 3280.23.

Reserve Bank Governor Allan Bollard today reiterated his optimistic view of the New Zealand economy, saying activity surprised on the upside and capacity usage looks to have increased. He kept the official cash rate unchanged at 2.5 per cent, citing concerns around the global economy.

Germany's DAX 30 jumped 3.4 per cent as the president of the European Commission, Jose Manuel Barroso, flagged the common bond proposal, which would give the region's debt-laden economies access to cheaper funding. On Wall Street, the Standard & Poor's 500 Index gained 1.4 per cent.

Tower, the general insurer controlled by Guinness Peat Group, rose 4.3 per cent to $1.45, leading gainers on the exchange. The stock is rated as 'outperform' according to a consensus poll of five analysts compiled by Reuters.

Australasian food company Goodman Fielder rose 2.6 per cent to 78c, recovering some of the ground it lost yesterday amid market concerns about its debt funding.

Sky Television rose 1.7 per cent to $5.45, with investors betting the pay TV operator will receive a boost in subscriptions from fans signing up to watch Rugby World Cup games.

Telecom, the country's biggest phone company, rose 1.4 per cent to $2.55 as it continued to chip closer to getting the official thumbs up on its separation proposal from investors.

Yesterday Telecom received approval from holders of two issues of sterling-denominated bonds to exchange the securities for notes in its Chorus once it split in two. Consent was needed as a the split presented the possibility of a default.

PGG Wrightson, the rural services company which sold its finance unit to Heartland New Zealand, fell 2.3 per cent to 43c, leading decliners on the exchange.

Listed carpetmaker Cavalier fell 1.6 per cent to $3.15 after Wool Equities emerged as a rival bidder for the 64 per cent stake of NZ Wool Services International held by the receivers Plum Duff and Woolpak Holdings.

Cavalier is part of a group that won antitrust approval to acquire WSI in a plan to rationalize the nation's wool scouring industry. WSI shares were unchanged at 52c and WEL was at 15c.

New Zealand manufacturing growth slowed for a third month in August as global economic growth faltered, the US had its credit rating cut and Europe's sovereign debt crisis grabbed headlines again.

The BNZ-Business New Zealand performance of manufacturing index slipped 0.3 points to 52.9, remaining above the 50 level which indicates expansion.

The New Zealand dollar recently traded at US81.78c, down from US82.23c this morning after Reserve Bank Governor Alan Bollard backed away from hiking interest rates in the immediate future, leaving the official cash rate at 2.5 per cent.

The currency is hovering at a key technical level, said Alex Sinton, a senior dealer at ANZ New Zealand, and is likely to drop as to US80c if it breaks lower.

- BusinessDesk