US, world stocks edge up due to US growth data

[August 28, 2010]  LONDON (AP) -- Stocks edged higher in Europe and on Wall Street Friday after a key U.S. economic growth figure was not as bad as feared, and as investors looked ahead to a speech by Federal Reserve Chairman Ben Bernanke.

Global markets have been rattled in recent weeks by signs that growth is losing momentum, particularly in the world's largest economy. On Friday, official data showed U.S. gross domestic product grew by 1.6 percent during the April-June period. That's way down from the government's earlier estimate of 2.4 percent but not as bad as the 1.4 percent expected by economists.

After trading lower all day, Britain's FTSE 100 stock index was up 0.5 percent at 5,180.34, France's CAC-40 rose 0.4 percent to 3,490.16 and Germany's DAX increased 0.3 percent to 5,931.52.

Asian indexes mostly closed lower but Wall Street picked up on the open -- the Dow industrial average was up 0.6 percent at 10,041.51 and the Standard & Poor's 500 was 0.5 percent higher at 1,052.58.

Because investor confidence has been hit by a run of bad U.S. economic data, there was some apprehension over the revised GDP data being published. While the data still portrays a slowing recovery, it also calmed the markets' darker fears.

"There are a couple of encouraging signs in this second report," said Paul Ashworth, analyst at Capital Economics.

He noted corporate profits were up and that the downward GDP revision was mostly due to lower inventory rebuilding and higher imports. Still, the outlook remains challenging.

"The second quarter wasn't as bad as the headline GDP figure looks, but, unfortunately, that doesn't mean the third quarter is going to be any better," Ashworth said.

Against that backdrop, Bernanke is speaking at a symposium of global policymakers at Jackson Hole, Wyoming, later Friday, and investors will be looking for clues about whether his central bank intends to provide any additional support.

Analysts, however, caution that the Fed is reluctant to loosen its monetary policy significantly.

"Bernanke is likely to keep the door open to such a move, but he will also stress that this is conditional on the data getting sufficiently worse to warrant this," said Daragh Maher, foreign exchange analyst at Credit Agricole. "The hawkish mood of many Fed members suggests the bar will be pretty high on this front."

In Asia, Japan's benchmark Nikkei 225 stock average recovered from early losses to close 1 percent higher at 8,991.06 on news that Prime Minister Naoto Kan was meeting reporters to discuss how the government will handle the yen's surge.

A pledge by Japan's finance minister to work more closely with the central bank to curb the yen's rise helped boost exporters. Sentiment was buoyed, also, by the government's report Friday that the jobless rate in July fell to 5.2 percent from 5.3 percent in June -- the first decline in six months.

Chinese investors resumed buying to boost the benchmark Shanghai Composite Index by 0.3 percent to 2,610.74. But the gains were capped by mixed earnings from major companies and uncertainty over whether the government will loosen tight credit policies as the economy slows.

Hong Kong's Hang Seng fell 0.1 percent to 20,597.35 while South Korea's Kospi dropped less than 0.1 percent. But shares in most other markets were higher, with Australia's S&P/ASX 200 up 0.3 percent and Taiwan's benchmark adding 0.4 percent.

In New York on Thursday, the Dow Jones industrial average fell 0.7 percent to 9,985.81. The Dow had traded below 10,000 several times this week, but hadn't closed below that level since July 6.

In currencies, the dollar rose to 84.93 yen Friday from 84.28 yen in New York late Thursday. The euro rose to $1.2716 from $1.2702.

Benchmark crude for October delivery was up 7 cents at $73.43 a barrel in electronic trading on the New York Mercantile Exchange. The contract settled at $73.36 on Thursday.

[Associated Press; By CARLO PIOVANO]

Associated Press writers Elaine Kurtenback in Shanghai, Shino Yuasa in Tokyo and researchers Bonnie Cao and Ji Chen in Beijing and Shanghai contributed to this report.

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