Europe finishes 1st trading day of 2010 over 1% higher

Joshua Raymond, Market Strategist at City Index commented: "European equities started 2010 in full vigour with the heavyweight mining, energy and banking firms all in strong demand, helping to push European Indices higher by over 1%.

Investors came in this morning in optimistic moods for the start of the year and demand for equities was high. That positivity grew as the day continued and better than expected manufacturing data from the US helped to facilitate further buying in the afternoon's session.

It seems that many of those investors who went away for an early holiday in December are back already and making their moves which is a big positive for sentiment.

European markets have posted gains 7 times out of the last 8 years for the first trading day of the new year and so today's gains are no surprise, particularly with the way equities finished 2009. The key really will be whether this momentum can hold and if the FTSE 100 were to break through the 5500, which would mark a new 16 month high, and interest rates remain low, then certainly a good start to the year could be on the cards.

We have a raft of key data out this week and so investors could take a pause as we venture further into the trading week with traders awaiting FOMC minutes, a Bank of England rate announcement and the all important Non Farm Payroll data out of the US on Friday.

The main heavyweight sectors have been the engine behind today's gains with the energy, miners and banking sectors all rising 2%.