European stocks rise despite plunging Japanese stocks

LONDON (AFP) - European stock markets rose on Thursday despite plunging Japanese stocks as traders digested United States growth data and signs of improved confidence in the euro zone.

At the close, London's FTSE 100 index of leading shares gained 0.45 per cent to 6,656.99 points. Frankfurt's DAX 30 index advanced 0.76 per cent to 8,400.2 points, while in Paris the CAC 40 rose 0.56 per cent to 3,996.31 points.

"The significant decline of 5 per cent overnight in Japan has dented sentiment but failed to make any real impact to the downside in European markets.... But this anomaly does beg the question, if not now, when?" said Ms Brenda Kelly, senior market strategist at traders IG.

US stocks also gained in early trade on Thursday after two days of losses, as the government's revised estimate of first-quarter economic growth came in barely changed at 2.4 per cent.

"The Q1 GDP (gross domestic product) data continues to paint the picture of an economy with strengthening fundamentals that is facing significant fiscal drag," said Ms Ellen Zentner of Nomura Securities International.

In midday trade, the Dow Jones Industrial Average was up 0.42 per cent, the broad-based Standard & Poor's 500 rose 0.58 per cent, while the tech-rich Nasdaq Composite Index gained 0.73 per cent.

In foreign exchange trading on Thursday, the euro rose to US$1.3041 from US$1.2938 late in New York on Wednesday.

The dollar inched up to 101.08 yen from 101.06 yen on Wednesday.

On the London Bullion Market, the price of gold climbed to US$1,418.50 an ounce from US$1,382.50 on Wednesday.

"The euro has... derived support in the near-term from the stronger than expected rebound in German inflation to 1.5 per cent in May, which modestly lowers the probability of another... (European Central Bank) rate cut in June," said Mr Lee Hardman, a currency analyst at the Bank of Tokyo-Mitsubishi UFJ in London.

Mr Hardman added that the European single currency should win support also from "a slower pace of fiscal tightening" after the European Commission gave euro zone heavyweights France and Spain extra time to meet their budget deficit targets.

Asian stocks fell on Thursday, with Tokyo plummeting more than 5 per cent as the yen gained strength, after a series of economic forecasts underlined concerns over global growth, traders said.

Tokyo stocks tumbled 5.15 percent to 13,589.03 points as jittery investors dumped shares following a sharp fall on Wall Street overnight.

Sentiment was downbeat after the Organisation for Economic Cooperation and Development (OECD) on Wednesday trimmed its world economic growth forecast for 2013 to 3.1 per cent from 3.4 per cent.

The OECD slashed its growth forecast for the world's most advanced economies, except Japan, but said growth should pick up later this year.

Meanwhile optimism about profitability among European companies in China has fallen to an all-time low, a survey showed on Thursday, with only 29 per cent saying the outlook was positive in the world's No. 2 economy.

The statistic in the European Union Chamber of Commerce in China poll of more than 500 of its members was down from 34 per cent last year, and the lowest since the first survey in 2004.

This, as consumer and business confidence in the 17-nation euro zone bounced back in May after a sharp drop in April, a European Commission survey showed.

Mr Howard Archer at IHS Global said the May report, along with other data, suggested there was a "limited overall pick-up in economic sentiment", pointing towards a second-quarter stabilisation in the economy.

"If the euro zone does finally manage to stop contracting overall in the second quarter, it is likely to be heavily dependent on clear growth in Germany," Mr Archer said.