Global stock markets kicked off the new year with robust gains yesterday despite more grim economic news from Europe, Asia and the United States.

Global stock markets kicked off the new year with robust gains yesterday despite more grim economic news from Europe, Asia and the United States.

In contrast to the rapidly darkening economic outlook, the mood in equity markets has brightened slightly. Having squirrelled cash into safe havens for much of the past quarter, investors are piling into assets hammered in the financial turmoil of 2008.

In New York, the Dow Jones industrial average perked up soon after the opening bell.

The world's most-watched share index shrugged off further dismal US manufacturing data. Some traders said Wall Street has largely factored in more disappointing eco- nomic news. The Dow later closed 258.30 points higher at 9034.69.

The Institute for Supply Management, a group of purchasing executives, said its manufacturing index fell to a 28-year low of 32.4 in December from 36.2 in November. Any reading below 50 indicates contraction and the bigger the difference from 50 the greater the contraction.

"We're seeing some New Year optimism even though volumes are thin," said Andre Bakhos, president of Prince-ton Financial Group in New Jersey.

US stocks enjoyed a rally in the final session of 2008 on Wednesday, with some investors building positions in the hard-hit financial sector after the worst year for the US market since 1937. The Dow Jones Industrial Average gained 108 points on Wednesday, ending down 34% for the year. The S&P 500 Index lost more than 38% over the course of the year and the Nasdaq Composite fell more than 40%.

As well as the grim ISM reading, investors digested other bad economic news around the world.

In Asia, Singapore said its economy shrank by an annualised rate of 12.5% in the fourth quarter of 2008, while China's manufacturing sector, which accounts for 43% of the economy, contracted for a fifth straight month in December. Meanwhile, South Korea, Asia's fourth-largest economy, suffered a trade deficit for 2008 - its first in a decade.

In Europe, manufacturing activity contracted for the seventh month running in December for the countries using the euro, falling at its sharpest rate for at least 11 years.

And in the UK, house prices fell in 2008 at their fastest rate for at least 25 years, the UK's biggest mortgage lender HBOS said. Elsewhere, the Chartered Institute of Purchasing and Supply reported that the manufacturing sector, which accounts for around 15% of the total economy, suffered its second worst month since 1992 in December.

London shares ignored the gloom with the FTSE-100 benchmark index soaring 2.9% - up 127.6 points at 4561.8 - as oil and commodity stocks provided a new year boost after the index closed 2008 with the worst annual performance on record.

However, the weak economic figures hit UK government bonds with the yield on two-year cash gilts falling below 1% for the first time on record.

BP shares closed more than 5% higher, up 26.75p at 552.75p, while Royal Dutch Shell added 95p to 1821p - a gain of 6%.

Market chatter suggested the increasingly weak economic outlook would provide some safe-haven buying in gold, which helped lift commodities.

Gold miner Randgold Resources extended its 60% rise during 2008 into the new year, with a 115p advance to £30.63.

Xstrata was top of the risers' board, ahead by 107.5p at 747.5p, while Rio Tinto gained 204p to 1694p.

Banks were also on the front foot after a dismal 2008. Royal Bank of Scotland added 3.1p to 52.5p, while HBOS gained 3.5p to 72.5p despite the pressure of a potential legal obstacle to its tie-up with Lloyds TSB posed by the trustees of the HBOS pension scheme.

On mainland Europe, Germany's DAX was 162.87, or 3.4%, higher at 4973.07 and France's CAC-40 rose 131.72 points, or 4.1%, to 3349.69.

Earlier, Hong Kong's Hang Seng Index vaulted 655.33 points, or 4.6%, to 15,042.81. Japanese financial markets and a number of other Asian exchanges were closed yesterday for the New Year holidays and will re-open on Monday.