European markets enjoyed strong gains overnight amid signs the eurozone economy may finally be emerging from recession. Data showed manufacturing activity in Spain, Italy and the UK expanding at a faster than expected pace last month.

Sentiment was buoyed further by news UK mobile giant, Vodafone, is about to sell its stake in US-based Verizon Wireless, in a deal believed to be the biggest in corporate history.

The positive economic developments ignited rallies on the three major European indices. US markets were closed for the Labor Day holiday.

The UK FTSE soared 93 points (+1.5%) to 6506, the German DAX leapt 141 points (+1.7%) to 8244 and the French CAC jumped 72 points (+1.8%) to 4006.

There was no physical trading in gold and oil due to the closure of US markets, but the two commodities weakened in electronic trading amid diminished concerns of a strike against Syria.

Oil was down 0.8% to US$106.82 a barrel and gold futures slipped 0.3% to US$1392 an ounce.

The pound was the big winner in currency markets, rising against most of its major rivals on the back of the strong UK manufacturing numbers. Sterling added 0.3% to US$1.5544.

Elsewhere, the Aussie climbed 0.8% to US$0.8978 ahead of today's RBA meeting at 2:30pm AEST, which is expected to produce no change in the official cash rate.

In other economic news, domestic retail sales and the current account are both due for release at 11:30am, AEST.

Morning Market Update: Europe Rallies is a post from: Australian Stock Report Market Pulse Blog