The Australian share market has seen a rise on the first day of trading in 2012, with more than one per cent rise on the back of positive leads in the local bourse, boosted by the European stock markets and the rallying in commodity prices during the long weekend in Australia.

For the first time in a week, the Australian shares have risen as the materials sector led broad-based gains after the official positive manufacturing PMI data out of China for December beat market expectations, helping boost risk appetite, helping resources, and energy stocks.

Gains on shares were posted across the market after the better-than-expected German manufacturing data helped European markets spread more holiday cheer, though the volumes remained low.

Also cited as positive factors by traders were the hopes of policy easing in China and a slight calming of European jitters  although in the week ahead, the market is expected to face several major events.

A rise of 1.1 per cent to 3.7 per cent was seen on shares of BHP Billiton, Rio Tinto, Newcrest Mining, and Fortescue Metals after China's PMI rose to 50.3 against the 49.0 expected by economists.

Moreover, an increase of 0.8 per cent to1.7 per cent was seen on major banks, which is said to have been helped by an improved risk appetite after Europe's STOXX 600 has increased by 1.1 per cent and Germany's DAX advanced 3 per cent.

According to Dow Jones Newswires technical analysis, the S&P/ASX 200 index looks poised to rally to the 4200-4270 area this week.

The benchmark S&P/ASX 200 index closed up 1.1 per cent at 4101.2 after hitting a three-day high of 4108.1 intraday.

Meanwhile, the Australian dollar has made a positive start to 2012 as it posted a record high against the euro and touching a one-month peak against the US dollar as positive manufacturing data from China boosted investor sentiment.

At 5.00pm AEST, the Australian dollar was seen trading at 102.90 US cents, which is up 1.3 per cent from Friday's local close of 101.62 US cents.

According to Iress data, during the day, there was a currency movement between 102.17 US cents and 102.99 US cents.

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