Global equity markets rallied last week, as investors responded to a raft of better-than-expected economic indicators. The FTSE 100 rose by 77 points to close on Friday at 5,650, the Dax increased by 160 points to 6,058, and the Dow Jones finished the week up by 142 points at 12,360.

Much of the optimism was in response to a series of industrial surveys carried out by Markit, which are published in their PMI indices. An index reading above 50 indicates an expanding economy, while a sub-50 reading suggests contraction. Their global services and manufacturing index increased from 52 in November to 53 in December.

Markit’s UK services index increased from 52 in November to 54 in December, confounding forecasts that the index would fall. Given services accounts for 70% of the economy, many economists revised their forecasts for Q4 GDP upwards. The index for the UK construction sector also increased.

In both the US and Germany the latest official figures show a fall in unemployment. In Germany, the unemployment rate fell to 6.8%, the lowest level since 1991. In the US the rate dropped to 8.5%, as the Department of Labor confirmed that the world’s largest economy created two million jobs in 2011.

Consolidation is underway in the City broking industry, with the Sunday newspapers reporting that Panmure Gordon is in merger talks with Cenkos. Also, Bank of China and Bank of Tokyo Mitsubishi are reported to be looking at buying Hoare Govett, the broking business RBS is selling.

The government is expected this week to announce that the High Speed 2 rail link from London to Birmingham will go ahead. The Sunday Times carried a report that double-decker trains are being considered for the route.

In December we were subjected to a tsunami of gloomy economic forecasts, but the indicators published last week were relatively benign. The Markit indices, which are well regarded and closely watched by The Bank of England, suggest that October marked something of a low point for the global economy, with tentative signs of recovery emerging in November and December.

The pundits have over-estimated the impact of the Eurozone crisis on economies outside of the Eurozone – in the UK the economy beyond manufacturing is slow but growing, and we are seeing encouraging signs in the US. However, the situation remains tentative, and whether China has a soft landing in 2012 is a major issue.

Economic growth is built on investor confidence, and there has not been much of that lately. Some more indicators like the ones we saw last week, and that situation could change quickly.