Investors Pile into Risky Assets to Welcome 2012 With a Bang

After closing the book on a wild and nerve-wracking year, investors greeted the first trading day of 2012 with a wide rally Tuesday -- bidding up equities, commodities and other risky assets across the board. Positive manufacturing data from India, China and the U.S., and the relative lack of bad news out of Europe contributed to the bullish sentiment. Major U.S. equity indices rose over 2 percent in early morning trading.

While gains were pared by mid-afternoon, the benchmark Dow Jones Industrial Average index was up to 12,429.51, a gain of 1.73 percent for the day. The wider S&P 500 index followed a similar pattern, climbing to 1,278.95 in mid-afternoon trading, up 1.70 percent.

The rally in equities was as wide as it was strong. On the New York Stock Exchange, advancing issues outnumbered declining ones by a ratio of nearly 4 to 1.

The gains in U.S. markets followed similar rallies overseas. Hong Kong's Hang Seng index and India's BSE Sensex closed up 2.40 and 2.72 percent for the day, respectively. Month-end reports released before the market opened showed manufacturing growth for both these countries in December. Indian equities were additionally boosted by new rules that allow more direct investment by foreign institutions.

In London, the FTSE 100 benchmark similarly closed the day up, with a gain of 2.3 percent. While continental equity markets were weighed down by financial stocks during early trading, both the benchmark French and German stock indices were in the green for the day. The euro, which had fallen dramatically against the dollar in the last few days of last year's trading, recovered slightly Tuesday, surpassing the psychologically important $1.30 mark to recently trade for $1.3049 per euro.

After slumping dramatically in December, gold for spot delivery was also trading up, breaking the $1,600 mark in early afternoon trading.

Oil futures also saw increased buying, as news regarding military developments in Iran pushed Brent crude for February delivery past the $111 per barrel mark.

The flight to risky assets did mean one class of investments, U.S. government bonds, fell. Yields on 10-year notes, which go in the opposite direction as bond prices, rose to 1.95 percent in mid-afternoon trading, from 1.87 percent on Friday.