Johannesburg — WORLD markets entered the new year on a positive note on hopes that governments would step up efforts to revive the global economy after equity prices suffered their largest falls on record last year.

But with most investors still on holiday and many markets closed, trading volumes were extremely light.

On the JSE, stocks rose for a fourth day on Friday, as resources shares rallied.

The rand held on to recent gains against the dollar, after tumbling 28% last year.

Hong Kong's Hang Seng index climbed 4,6% as telecoms shares surged. Japan's market was closed. European shares also rose, despite a report showing euro zone manufacturing activity slumped to a record low last month.

The Markit Eurozone purchasing managers' index for the manufacturing sector slumped to 33,9 last month, a low not seen in the survey's 11-year history and well below the 34,5 forecast by economists.

The downturn in activity was accompanied by falling inflationary pressures, clearing the way for the European Central Bank to cut interest rates again when it meets later this month.

Stocks have climbed since US president-elect Barack Obama pledged last month to stimulate growth with the biggest infrastructure investment since the 1950s and the Federal Reserve cut interest rates to 0% to combat the worst global financial crisis in seven decades.

However, traders remain cautious about a sustained recovery. "The mindset may be that the turmoil of 2008 is now behind us and that 2009, although not set to be great, needs to start with a bang," said Jimmy Yates, a dealer at CMC Markets in London.

The JSE's all share index closed 1,2% higher at 21675 as resources stocks climbed 4,3%.

The rand was firmer at R9,31/$.

London's FTSE 100 index was up 1,4%, and the CAC-40 in Paris was 2,1% firmer. US stocks opened mixed after a weaker than forecast manufacturing report offset speculation that government bail-outs will bolster the economy.

Investec Asset Management equity trader Kevin de Villiers said JSE trade remained thin, and was largely driven by international players pushing mining stocks, such as Anglo American, higher. Anglo leaped 6%, and BHP Billiton was up 4%.

De Villiers said stocks moved higher all week with some confidence returning to markets.

Money market rates improved as the credit crunch on international markets eased.

However, De Villiers said it was too soon to call an end to last year's market turmoil as more clarity was needed on global stimulus packages and the measures Obama planned to implement once he took office later this month. "There's still massive uncertainty," he said.

Ion de Vleeschauwer, chief currency dealer at Bidvest Bank, said lack of importer interest due to the holiday season and exporters offloading dollars drove the rand's strength over the past week.

He said the currency could come under pressure this week as activity picked up and as importers took advantage of the rand's stronger position against the dollar, the euro and sterling.

De Vleeschauwer said the health of the dollar and the Reserve Bank's stance on interest rates were likely to give the rand direction.

Bond yields were pricing in an aggressive cutting of interest rates, which could weaken the rand as it made it less attractive for investors.

The oil market got off to a feeble start, falling nearly 8% on Friday after a strong rise on Wednesday.

London Brent crude dropped $3,04 to $42,55 a barrel. The price of oil fell 54% last year, leading to the Organisation of Petroleum Exporting Countries slashing production by 2,2-million barrels.

Gold also eased back 1% to $870,40 an ounce as the dollar strengthened, cutting the metal's appeal as a currency hedge.

"People are looking at oil and the dollar for guidance," said Wolfgang Wrzesniok-Roßbach, analyst at metals group Heraeus Metallhandels. With Reuters, Bloomberg