While you were sleeping: US manufacturing advances

(BusinessDesk) Equities received a lift from unexpected growth in US manufacturing, underpinning hopes that the slowdown in the world's largest economy might be a little less than feared.

A report today showed that the Institute for Supply Management's US factory index increased to 51.5 in September from 49.6 a month earlier. The expansion was a surprise to most economists.

"Numerically, that is a pretty small amount," Peter Jankovskis, co-chief investment officer at Oakbrook Investments in Lisle, Illinois, told Reuters. "But in terms of looking at the number, it's the difference between seeing contraction and seeing growth. So, psychologically, that's pretty important."

The ISM's new orders measure rose to a four-month high of 52.3 from 47.1, Bloomberg reports. The employment index advanced to 54.7 from an almost three-year low of 51.6 the prior month.

The gain from August was the biggest since October 2009. The group's measures of production, export demand, prices paid and order backlogs also climbed in September.

In afternoon trading in New York, the Dow Jones Industrial Average gained 0.92%, the Standard & Poor's 500 advanced 0.86%, while the Nasdaq Composite Index edged 0.09% higher.

Meanwhile, US Federal Reserve chairman Ben Bernanke stresses a promise that the central bank will keep borrowing costs low even amid signs of improvement.

"We expect that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economy strengthens," he told the Economic Club of Indiana in Indianapolis today.

The Fed's promise to keep the short-term interest rate "at exceptionally low levels to at least mid-2015 ... doesn't mean that we expect the economy to be weak through 2015."

In Europe, the Stoxx 600 Index finished the session with a 1.4% climb from the previous close. National benchmark stock indexes also rose in Germany, France and the UK, gaining 1.5%, 2.4% and 1.4%, respectively.

The euro, last up 0.4% against the greenback, also benefited from the optimism about the eurozone's measures to deal with its ongoing sovereign debt crisis.

Specifically, investors drew heart from a better-than-expected health of the Spanish banking system after 14 lenders were found to require a 59.3 billion euro injection of capital and the country announced its fifth austerity budget.

Over the weekend Spain said it plans to borrow 207.2 billion euros next year, widening the country's debt to 90.5% of gross domestic product, according to Bloomberg.

The economic data certainly is not bright. Reports show that manufacturing in the eurozone shrank for a 14th month in September and unemployment climbed to the highest on record.