Shares bounce back on US optimism

Markets remain on edge

Stocks climbed after reports of a strong start to the Christmas shopping season in the US renewed optimism in the health of the global economy.

Investors shrugged off concerns about weakening US demand and bought shares after a heavy sell off last week made prices more attractive.

Mining firm Rio Tinto led gains in London on merger-related news.

The UK's FTSE 100 rose 0.45% to 6290.20 while France's benchmark Cac 40 gained 0.55% to 5551.59.

Germany's Dax went up 0.63% to 7656.63.

Asian shares rally

Asian markets saw bigger gains with their export-led economies more sensitive to US consumer demand.

It's not like the fears have gone away, credit markets remain extremely tight and the same worries are still out there Edmund Shing, BNP Paribas

Japan's benchmark Nikkei 225 index closed 1.7% higher, while Hong Kong's Hang Seng index ended the day up 4.1%.

But Edmund Shing at BNP Paribas, in Paris warned that "this rally is fragile".

"In principle, we're in a recovery mode because we have not fully priced in the rally in the U.S. on Friday, and Asian markets were strong overnight," he said.

"[But] it's not like the fears have gone away, credit markets remain extremely tight and the same worries are still out there," the strategist added.

Rumours

Meanwhile, Rio Tinto shares rose 3.65% after the state-owned China Business newspaper reported a possibility of a $200bn bid for the Anglo-Australian mining group.

The report was denied by a China Investment official, who asked not to be named.

"It seems pretty clear that rumours about the investment intentions of China's sovereign wealth fund, China Investment Corp, are going to have a big bearing on the market going forward," Bear Stearns, currency analysts wrote in a note.

The main support for indexes across Asia, but particularly Japan, Hong Kong and South Korea, came from a new enthusiasm for exporters, including Canon, Sony and Nintendo.

Investors bought shares in these firms after a stronger-than-expected start to the Christmas shopping period in the US, which typically begins on the day after the Thanksgiving holiday.

A report by ShopperTrak RCT, a market analysis company, showed that sales gained 8.3% on Black Friday, the day following Thanksgiving.

"A lot of people were expecting the figure to be very weak," said Yasutoshi Nagai of Daiwa Securities SMBC.

"But the data suggests that spending during the Christmas season may be stronger than expected."