European stocks, euro rise on Chinese factory data

European stocks and the euro rose on Monday, with Frankfurt and Paris hitting highs for the year in the wake of positive Chinese and eurozone manufacturing data, as EU finance ministers met for more talks on the debt crisis.

London's benchmark FTSE 100 index edged up by 0.08 percent to close at 5,871.24 points, as Britain awaits a government budget update on Wednesday along with new growth forecasts.

Frankfurt's DAX 30 gained 0.40 percent to 7,435.21 points and the Paris CAC 40 added 0.26 percent to 3,566.59.

In intraday trading, Frankfurt hit its highest point since July 8, 2011, while Paris reached its highest level so far this year.

The launch of a plan by Greece to buy back some of its huge debt at discounted prices also boosted market sentiment.

"Better tone in Europe today, thanks to respectable manufacturing PMIs out of China and Greece?s debt buy back plans," ETX Capital analyst Ishaq Siddiqi said.

"China?s manufacturing sector continued to strengthen last month, instilling confidence over the world?s second biggest economy," he added.

The European single currency nonetheless climbed to $1.3061 from $1.2986 late in New York on Friday.

Gold prices dropped to $1,720.00 an ounce on the London Bullion Market, from $1,726 on Friday.

But markets eased back from session highs after disappointing US manufacturing data.

In New York, markets were mixed after the Institute for Supply Management said its index on manufacturing activity for November fell into contraction territory, at 49.5, after two months of expansion, with businesses blaming the slow global economy and uncertainty from the fiscal cliff battle in Washington.

In midday trading, the Dow Jones Industrial Average was off by 0.09 percent, while the S&P 500 had gained 0.08 percent and the Nasdaq Composite added 0.23 percent.

Meanwhile, European finance ministers regrouped in Brussels for two-day talks focused as much on EU-wide problems installing cross-border banking supervision as on eurozone bailouts.

After a string of emergency gatherings that finally resulted in a deal last week to get Greece's bailout aid flowing after months in limbo, Monday marked a return to routine among the 17 states that share the currency.

Asian stock markets closed mixed earlier in the day after data showing Chinese manufacturing activity had picked up pace in November.

Beijing said on Saturday that factory activity grew for the second month in a row in November, the latest figures showing the world's number two economy is emerging from its recent slowdown.

The country's official purchasing managers' index (PMI) reached 50.6, up from 50.2 in October and 49.8 in September and the highest since hitting 53.3 in April. Anything above 50 indicates expansion.

In a separate survey, HSBC said its PMI hit a 13-month high of 50.5 in November from 49.5 in October. The bank's PMI had been in negative territory for 12 months.

Chinese manufacturing has been hit by weaker demand in Europe and the United States, with economic growth hitting a more than three-year low of 7.4 percent in the July-September quarter.

Separate data showed the eurozone manufacturing sector reporting signs of a slight improvement in November but overall it remained stuck deep in the doldrums for a 16th month running.

The PMI compiled by the Markit research firm put the eurozone manufacturing sector on 46.2 points, unchanged from its initial estimate but up from 45.4 points for October.

Markets were worried however by a lack of progress towards a deal to avoid a combined shock of US tax hikes and spending cuts due to take effect on January 1 and which could tip the economy into recession.

Republican House Speaker John Boehner told the Fox News Sunday TV show that talks were going "nowhere".

He said he was "flabbergasted" when Treasury Secretary Timothy Geithner, President Barack Obama's point man for the talks, presented the White House's proposal, which included huge tax increases for the rich.

"I looked (at) him and said, 'You can't be serious,'" Boehner recounted, saying three of the seven weeks available had "been wasted with this nonsense".