Friday October 30, 11:50 AM
European stocks pause after global rally
LONDON (AFP) - European equities paused on Friday after a global rally was sparked by news the US economy has emerged from recession, following France, Germany and Japan out of the worst downturn since the 1930s.
In late morning deals, London's FTSE 100 index of leading shares gained 0.25 percent while Frankfurt's DAX 30 (Xetra: news) eased 0.43 percent and in Paris the CAC 40 (Paris: news) slid 0.24 percent.
News that the US economy bounced out of recession in the third quarter drove up stock markets in Europe and New York on Thursday as relieved investors reversed Wednesday's heavy falls.
"Stunning GDP numbers in the US have given the markets a much-needed shot in the arm," said ODL Securities analyst John Murphy.
"We now wait to see if increased confidence levels push more buyers in to the market."
Asian stocks rallied Friday on the news and after Japan also released upbeat figures, lifting hopes for a recovery in global economies.
Tokyo won 1.45 percent, Hong Kong soared 2.29 percent and Sydney jumped 1.5 percent.
Later Friday, investors will seek more guidance from data, including US personal income and spending numbers and the Chicago PMI indicator of manufacturing activity, hoping to confirm the better-than-expected Gross Domestic Product (GDP) figures.
Official data showed Thursday that the American economy grew 3.5 percent in the third quarter -- its strongest growth in two years and the first since the second quarter of 2008.
The figures, helped by multi-billion dollar stimulus measures from Washington, also beat analysts' consensus forecasts for 3.2-percent growth.
The news sent the US Dow Jones index 2.05 percent higher on Thursday, its largest single jump since July and a day after recording its worst single fall in October.
The US growth figures came after three days of heavy losses caused by downbeat figures earlier in the week from the world's biggest economy, shifting attention from a slew of forecast-beating corporate results.
The data boosted other world markets, with Sao Paulo soaring 5.9 percent, Buenos Aires 4.09 percent and Toronto up 2.50 percent.
However, some analysts played down the figures, saying that Washington's enormous stimulus measures had skewed the data.
"Yesterday's better-than-expected US GDP release triggered a sharp market rally that left us somewhat at a loss," said Citigroup (NYSE: C - news) analyst Michael Hart.
"While the headline figure had been clearly (above) expectations at 3.5 percent ... it had always been clear that temporary factors would represent strong underlying drivers.
"In particular, auto and parts sales contributed a full percentage point to GDP which is likely to fall out of the equation in the fourth quarter."
Hart warned that the troubled United States economy was not out of the woods just yet.
"In other words, while the headline figure clearly heralds the end of the recession, the all-clear cannot yet be sounded.
"What is more, today's income and spending data could yet put another dampener on market sentiment," Hart added.
Analyst Dermot O'Leary at Goodbody stockbrokers in Dublin agreed that exceptional factors had boosted the US economy, adding the "cash-for-clunkers" car incentive scheme accounted for a chunk of growth.
"It is clear that the ongoing stimulus ... was a big contributor to the growth," he said.
"This, of course, was what it was supposed to do. It needs to be followed by more signs that the recovery has morphed into a sustainable one. There is momentum in economic activity but those signs have not arrived just yet."
Earlier this week, world markets had been sent spiralling downwards on a mixture of poor US consumer sentiment and an unexpected fall in new home sales.
However markets were further boosted on Friday by Japanese government figures showing unemployment fell to 5.3 percent -- beating expectations of a rise to 5.6 percent -- while household spending rose.
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