EUROPE MARKETS: European Stocks Rally After Upbeat PMIs

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European stock markets showed broad-based gains on Thursday, after data showed a pickup in manufacturing activity in both the euro zone and China.

The Stoxx Europe 600 index rallied 1% to 303.69, on track to break a three-day losing streak.

Among notable movers in the index, shares of Royal Ahold NV jumped 5.1% after the Dutch supermarket retailer reported a 3% rise in second-quarter sales at constant exchange rates.

Shares of IMI PLC climbed 5% after the engineering group reported an 8% rise in first-half profit and raised dividends 8%.

Banks were also higher, with shares of UniCredit SpA up 3.9% in Milan, Commerzbank AG 3.5% higher in Frankfurt and HSBC Holdings (HBC) rising 1.7% in London.

More good news from Europe

More broadly, the pan-European index was boosted by encouraging macroeconomic data from the euro zone, showing business activity in the region expanded at the fastest pace in more than two years in August. The Markit preliminary composite purchasing managers' index rose to a 26-month high of 51.7, up from 50.5 in July. A level above 50 indicates expansion.

"So far, the third quarter is shaping up to be the best that the euro area has seen in terms of business growth since the spring of 2011. The economic picture from the surveys is therefore coming into line with policy makers' expectations of a modest, yet still fragile, return to growth," said Chris Williamson, chief economist at Markit, in the data release.

On a country-specific basis, data showed Germany's composite PMI rose to a seven-month high, driven by the fastest rise in manufacturing production for over two years. The readings in France were more mixed, with the composite PMI dropping to a two-month low of 47.9, while the manufacturing reading remained at 49.7.

Germany's DAX 30 index jumped 1.3% to 8,392.40, while France's CAC 40 index gained 1.1% to 4,059.96.

Investors also welcomed upbeat data from China. The flash reading of the country's manufacturing PMI, compiled by HSBC and Markit, showed a rebound to a four-month high of 50.1 in August, from a final reading of 47.7 in July, an 11-month low.

"The gap between the official and the HSBC readings that had puzzled the market for four months was basically closed by this surprising rebound. All major activity data are now moving in the same direction, indicating a much-strengthened growth momentum in Q3," said Yao Wei, China economist at Société Générale, in a note.

Miners, which tend to rise on growth indications from China, climbed after the data. Shares of Rio Tinto PLC (RIO) gained 1.9% in London, and BHP Billiton PLC (BHP) added 2.1%.

The U.K.'s FTSE 100 index traded 0.9% higher at 6,447.68.

In the U.S., stock opend higher, after closing sharply lower on Wednesday on the back of the release of minutes from the Federal Reserve's July meeting.

"The minutes gave a slightly more cautious take on the outlook, which could give the Fed more wiggle room to delay the start of tapering from the September date consensus now expects," said Robert Wood, chief U.K. economist at Berenberg in London, in a note.

Data out of the U.S. on Thursday showed jobless claims rose by 13,000 to 336,000 last week, but remained near a postrecession low.

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