Optimism on China counters woes in U.S., Europe

By Daniel Trotta

NEW YORK (Reuters) - An improvement in China's manufacturing sector and hopes for further economic stimulus by its government lifted investor sentiment worldwide on Wednesday, even though the service sector in Europe and the United States continued to shed jobs.

An important measure of Chinese manufacturing improved in February for the third month in a row and factories restocked in anticipation of economic recovery, sparking a surge in oil prices and stock markets, which had been trading at 12-year lows.

A senior Chinese economic planning official said China would increase spending in areas such as infrastructure and manufacturing on top of the 4 trillion yuan ($585 billion) stimulus package unveiled in November.

"What is good for China is good for the world," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

A day after U.S. President Barack Obama said now might be a good time to buy stocks, equity markets around the world rallied, with China's main stock index surging over 6.0 percent and European shares closing up 3.9 percent.

The Dow Jones industrials .DJI rose 2.2 percent, even though General Electric (GE.N) fell 4.6 percent for its fourth day of losses as investors worried its ailing financial arm could threaten the whole company.

The S&P 500 .SPX and Nasdaq .IXIC also climbed more than 2 percent. .N

The Chinese data also fueled a 9 percent rise in oil prices, along with weekly data showing an unexpected decline in U.S. crude stockpiles.