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The economy: What's not to love? Add to ...

Investors around the world are saying they love economic data on mornings such as this one as risk-aversion takes a backseat.

Purchasing managers' indexes (PMIs) suggested both that the economic recovery was gaining momentum in Europe -- boosting demand for goods -- and also that firms have managed to pass on some of their increased costs to their customers.

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British manufacturing activity grew in January at its fastest pace since records began in 1992, indicating the manufacturing sector continues to enjoy strong growth even as broader economic activity remains subdued.

And the latest seasonally adjusted reading of German unemployment showed a decline to 7.4 percent of the workforce, the lowest rate since Germany's reunification in October 1990.

In China, a tighter monetary policy helped produce a bigger-than-expected slowdown in manufacturing growth as its PMI fell to a five-month low in January.

All these figures raised some concerns over inflation as well. The euro hit its highest level against the U.S. dollar in more than two months as traders bet on a European interest rate hike.

Equity investors were less concerned. Britain's FTSE 100 was 57.08 points, or 1 percent, higher at 5,920.02. France's CAC 40 rose to 4040.05, up 0.86 per cent, and Germany's DAX gained 1 per cent to 7147.75.

Japan's Nikkei ended at 10274.50, 0.36 per cent higher on the day, and Hong Kong's Hang Seng was up 0.2 per cent at 23482.90.

The premium investors demand to hold lower-rated euro zone government bonds than German debt fell, after the release of the PMI and better-than-expected details of Spanish savings banks' exposure to property and bad loans.

The weak U.S. dollar pushed gold higher. Spot gold was bid at $1,335.65 (U.S.) an ounce.

A barrel of Brent crude oil in London was worth 50 cents less at $100.49, while West Texas Intermediate in New York was 64 cents lower at $91.55. Both remain near their highest levels for over two years.

Wall Street futures pointed to a higher open on Tuesday, extending the previous session's gains, ahead of January's U.S. ISM manufacturing report and December construction spending data. Dow futureswere up 0.35 per cent, while S&P 500 futures gained 0.49 per cent.

Forecasts indicate that the Institute for Supply Management's factory index was little changed at 58 last month from an eight-month high of 58.5 in December, according to Bloomberg News survey. That would mean an 18th straight month of manufacturing growth.

And there's more on the economy coming up later this week: U.S. retailers are likely to show only a modest rise in January sales after record snow kept shoppers away from malls and crimped demand for early spring merchandise. The numbers will also reflect a pullback in spending by shoppers, after they opened their wallets during November and December, helping U.S. retailers post their best holiday sales in six years.

And if you'd like to read more about the retail sector, we have a couple of good investing articles for you today:

  • Investing in the U.S. retail invasion
  • Sizing up which REITs will win from Target’s advance
 
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  • ES-FT
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