— Oil still above $100; Egypt riots choke ports —
Global stocks rallied and the euro rose to its highest versus the dollar in more than two months on strong manufacturing data worldwide and easing fears that Egypt's unrest would spread in the Middle East.
But crude remained above $100 a barrel in London as traders assessed the risk of unrest spreading to neighbors who are members of the Organisation of Petroleum Exporting Countries.
Cargo operations at Egypt's Alexandria and Damietta ports came to a standstill hampering shipments to the world's biggest wheat importer, while shipping lines prefer to re-route their ships away from the Mediterranean ports and Suez.
Global stocks jumped as manufacturing activity in the euro zone accelerated in January, while an index of the U.S. manufacturing sector rose to its highest level since May 2004.
Major European stock indexes rose more than 1%, as did the technology-rich Nasdaq composite in the United States.
The strong economic data lifted copper to a record high and tin prices also peaked.
"Manufacturing is outperforming other parts of the economy, but we're also seeing some inflationary seeds in costs rising," said Gary Thayer, chief macrostrategist at Wells Fargo Advisors in St. Louis, referring to the U.S. economy.
Global stocks as measured by MSCI's all-country world index jumped 1.2%, while the pan-European FTSEurofirst 300 index of top shares rose 1.4%.
On Wall Street, the Dow Jones industrial average was up 87.91 points, or 0.74%, at 11,979.84. The Standard & Poor's 500 Index was up 13.95 points, or 1.08%, at 1,300.07. The Nasdaq Composite Index was up 31.84 points, or 1.18%, at 2,731.92
Easing concern over unrest in Egypt helped boost the single European currency, initially pushing oil lower and taking the wind out of U.S. Treasury debt prices, which fell for a second straight day as investors unwound flight-to-safety purchases.
The euro climbed above key resistance around $1.3756, and traders said the single currency was poised to make a run to $1.40, a level that likely will attract selling interest.
The dollar was down against a basket of major currencies, with the U.S. Dollar Index off 0.45% at 77.384.
Against the Japanese yen, the dollar was down 0.35% at 81.78.
Oil rose and remained above $100 a barrel in London, but crude prices in New York fell.
The uprising against the Egyptian government is unlikely to disrupt tanker movement and oil flows along the strategic Suez canal and Sumed pipeline, but analysts and traders said that the restive mood in the region would support prices.
Brent crude futures rose 28 cents to $101.29 a barrel and U.S. crude oil futures fell 36 cents to $91.83 a barrel.
The benchmark 10-year U.S. Treasury note was down 20/32 in price to yield 3.45%.
Lower-rated euro zone debt rallied after data showed above-forecast growth in some of the region's weaker economies, adding to pressure on Bunds, which fell sharply on worries over persistent inflation.
Euro zone manufacturing sector data was surprisingly strong, showing growth primarily in Germany was lifting others in the bloc.
Spanish, Italian, Portuguese and Greek government debt yields all fell relative to 10-year German debt, dropping further from highs hit last month on concern over the ability of some states to borrow at sustainable cost.
Japan's Nikkei share index rose 0.4% and the MSCI index of Asian shares outside of Japan rose 0.3%.
EUROPE RISES
European share prices gained on Tuesday, with sentiment lifted by strong euro zone manufacturing data and technology stocks buoyed by positive results news from Autonomy and Infineon.
"We are having a strong day. Obviously we have had some decent PMI numbers out of the euro zone," said Peter Dixon, economist at Commerzbank, said.
Positive corporate numbers also helped sentiment.
Technology stocks featured among the top performers, with enterprise search software maker Autonomy jumping 6.9% after sales came in slightly above expectations.
German chipmaker Infineon gained 1.7% after it raised its full-year outlook, while British chip designer ARM whose architecture is licensed to Infineon, rose 2.7% after forecast-beating fourth-quarter profits.
MINERS RISE
Miners were in demand, gaining for the second session as confidence improved about the global recovery and the outlook for metals.
Sentiment in the sector was given a boost after HSBC's China Purchasing Managers Index reported a rise in January showing solid growth in the country's vast manufacturing sector.
The STOXX Europe 600 Basic Resources gained 2.1%, while Antofagasta, Fresnillo and Kazakhmys rose 3.4 to 4.8%.
On the downside, however, bearings maker SKF, a bellwether for manufacturing, fell 6.4% after it said it faced headwinds due to currency and higher raw material costs.
BP slipped 0.6% after profits came in weaker than expected.
And analysts said the FTSEurofirst 300 index which has risen 2.8% since the start of the year could be due for a correction after two straight months of gains.
"The momentum to the upside has to continue over the next two to three weeks or we could see a correction coming in. A correction of 5 to 8% can actually be quite healthy for a bull market," Joshua Raymond, market strategist at City Index said.
Across Europe, the FTSE 100 index was up 0.9%, Germany's DAX was also 0.9% higher and France's CAC 40 gained 0.8%.
EGYPT PORTS
Cargo operations at Alexandria and Damietta came to a standstill as widespread unrest keeps key staff from work and throws the economy into turmoil, shipping sources said, adding that the Mediterranean terminals, which especially handle bulk and container shipments including grains, had been affected by the daily curfew across the country.
"It (Alexandria port) is not closed but there is no work. Customs officials are not there. There is nobody to operate the cranes," said Dan Delany, an agent for the Lloyd's of London insurance market. "You could say the country has effectively shut down."
South Korea's Hanjin Shipping said on Tuesday it was re-routing some of its container vessels due to the unrest in Egypt which had hampered drydock operations at several ports.
Egypt's banks will remain shut for a third day on Wednesday and the central bank said it is still assessing whether they will close again on Thursday.
"Alexandria port is still open but no one is working for the moment," an Egyptian shipping source said. "Their cargo operations are not working properly because of labour problems."
Sources identified similar problems at Damietta port with ship container operations being disrupted at Port Said as well.
A French trader said a ship he had chartered to export an agricultural cargo to Egypt was circling close to the port of Damietta because he was afraid of not being paid by the private Egyptian buyer.
Danish shipping and oil group A.P. Moller-Maersk said on Monday it has suspended its terminal operations at Port Said.
PIPELINE
Movement of traffic through the Suez Canal was unaffected, the Canal Authority said.
Shipping sources said the Egyptian military had increased deployments at the canal and other strategically important sites such as the Sumed oil pipeline which links the Red Sea to the Mediterranean.
"So long as the army remains unified and protesters do not target this infrastructure they are likely to remain safe," said John Drake, a senior risk consultant with security firm AKE Ltd.
"It would take a major deterioration in the security environment for opportunists to target such strategic and well defended interests."
Freight players said tanker traffic through the Suez Canal was estimated to make up around only 15% of all transits.
"We believe that any disruptions to the Sumed pipeline will have greater consequences for tanker shipping than a closure of the canal," said Sverre Svenning, director of research at broker Fearnleys.
