Sentiment toward stocks rose around the world, reaching a record level in the US, as reports on manufacturing showed the global economy is recovering and investors bet that profits grew for the first time since 2007.

Investors forecast gains in each of the nine countries represented in the Bloomberg Professional Confidence Survey for the first time since the data began in 2007. The sentiment measure for the Standard & Poor’s 500 Index climbed 35 per cent to 54.37.

That’s only the second time the reading exceeded 50, signaling participants anticipate a rally in the next six months. The responses from 4.101 Bloomberg users were gathered January 4-8 as the MSCI World Index added 2.6 per cent.

Rising factory output in the US China and Europe helped send the S & P 500 to six straight gains to begin the year.

Analysts estimate that fourth quarter earnings reports beginning this week will show S&P 500 profit rose 62 percent, according to data complied by Bloomberg.

The results will follow the biggest annual rally since 2003 for MSCI World Index of equities in 23 developed nations. “The market is clearly in an upside trend”, said Luis Benguerd, a trader at inter-brokers Espanola in Barcelona, Spain, who participated in the survey.

“As long as we keep getting these macro figures and companies do as good as analysts expect them to do, that’s enough to keep this trend going”

The MSCI World has rebounded 74 percent from a 13-year low in March after the Federal Reserve left its benchmark interest rate at almost zero and the US government lent, spent or guaranteed as much as $9.66 trillion to end the recession and unlock credit markets. 

US factory output expanded in December at the fastest pace in more than three years, according to a report from the Tempe, Arizona-based Institute for supply Management. Chinese manufacturing surged the most since April 2004 last month, data compiled by London-based H SBC Holdings Plc and Market Economics showed. Production increased for a third month in December, Markit said.

The three reports were released January 4. The Bloomberg Sentiment Indexes for the US, Japan and Spain rose above 50 and reached all-time highs. The U.K gauge topped 50 for the first time since October, while Switzerland climbed to a record.

Spain exceeded 50 for the first time, adding 17 percent to 51.41. Confidence in Switzerland climbed 3.6 per cent to 60.89 and U.K index surged 22 per cent to 55.61. The measures for Italy, France and Germany increased 14 per cent, 3.7 per cent and 2.4 per cent to 62.61, 57.77 and 53.33 respectively.

The Dow Jones Stoxx 600 Index of European equities may advance 9.2 per cent through the end of 2010 as the economy grows strategists at New York based Citigroup Inc wrote in a January 4 report. Signs that the global economy is rebounding from its first recession since World War II have helped push prices on the MSCI World to 34.7 times profit from the past year at its 1.656 companies. That’s the most expensive valuation since 2002, making equities vulnerable should earnings fail to materialise.

Alcoa Inc., the biggest US aluminium producer, began earnings season on January 11 by missing the average analyst profit forecast. The S&P 500 lost 0.9 per cent following the New York based company’s report.

“Alcoa’s bottom-line number was not good and investors are selling because expectations were high”, said Mark Bronzo, a money manager in Irvington, New York, at security global investors, which oversees $21 billion. “The fear gets heightened”.

The MSCI World fell 0.4 per cent on Wednesday morning in New York  on a decline in oil and concern the Federal Reserve is preparing markets for higher interest rates.