Signs of robust economic growth in China and recovery in parts of Europe lifted world stocks on Wednesday while a relatively successful Portuguese debt sale helped ease short-term fears about the eurozone’s debt crisis.

The euro was up close to US$1.31, European shares rose nearly 1% and Japan was half a per cent higher. Wall Street also looked set to open stronger.

The cost of insuring Portuguese and other peripheral euro zone sovereign debt against default fell.

Better-than-expected Chinese factory data in November, with the official Chinese purchasing managers’ index (PMI) rising to a seven-month high of 55.2, showed health in one of the world’s largest economic engines, lifting sentiment. In Europe, the eurozone’s manufacturing sector expanded at its fastest pace in four months in November, led by heavyweights Germany and France. Britain’s manufacturing hit a 16-year high.

Serious concerns remained, however, about the pressure on eurozone debt and the methods by which it might be eased.

Fears were eased slightly after debt-ridden Portugal successfully sold 500 million euros in 12-month T-bills although borrowing costs rose to 5.281% from 4.813% previously, in a fresh sign of that investors expect Portugal to follow Ireland and Greece to seek a bailout.

Standard & Poor’s warning on Tuesday that it could cut Portugal’s credit ratings if growth prospects weakened further was having little impact.

There were also signs that the eurozone debt crisis was raising concerns among global policymakers. G20 deputy finance ministers discussed "the financial situation in Europe" on Monday in a teleconference, a senior G20 source in Asia said, and a top U.S. Treasury official is travelling to Europe.

The euro bounced back from recent lows to stand above US$1.30 EUR, up around three quarters of a per cent.

Analysts cautioned, however, that pressure could return quickly, especially if peripheral yield spreads began to widen again or if bond auctions were poor. Spain comes to the market on Thursday.

"You really need some aggressive action from the authorities in Europe to try and calm nerves and that’s really the key at this stage," said Greg Gibbs, a strategist at RBS in Sydney.

The extent of the damage to bond holders was underlined by new Citi bond returns data showing eurozone bonds lost 2.69% in November, with Ireland tumbling more than 11%, Spain more than 7% and nearly Portugal 5.8%.

STOCKS REBOUND

The Chinese and European data lifted risk appetite on stock markets. Although some countries fear Chinese policy tightening if the economic is deemed to be rising too fast, good growth in China is typically a booster for export-oriented countries.

MSCI’s all-country world stocks index was up 0.8% and its emerging market counterpart gained a solid 1.5%.

European stocks also rose sharply with the FTSEurofirst 300 gaining 1.1%.

As with the euro, however, analysts said the sentiment could easily be flipped by poor news on the eurozone bond front.

"We’re getting a technical rebound. A number of indicators showed the indexes as ’oversold’, and some investors have started looking for bargains. But we’re keeping a close eye on bond yield spreads to see if this stock rebound has legs," said Harry Sebag, head of sales trading at Saxo Banque.