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GLOBAL MARKETS-Stocks, euro up on German, French growth surprise

Published 08/13/2009, 05:27 AM
Updated 08/13/2009, 05:30 AM
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* MSCI world equity up 0.8 percent at 271.19

* German, French return to growth boosts Europe shares

* Euro zone GDP fall smaller than originally expected

* Euro, commodities gain ground; dollar lower after Fed

By Blaise Robinson

PARIS, Aug 13 (Reuters) - World stocks, commodities and the euro rose on Thursday as Germany and France surprised investors by reporting a return to GDP growth, while the dollar dipped after the Federal Reserve's less gloomy outlook for the U.S. economy.

Overall the euro zone remained just in recession in the second quarter, data showed on Thursday, although the 0.1 percent drop in GDP was much smaller than originally expected.

Germany and France provided the big shock by ending their recessions in April-June, earlier than many policymakers and economists had expected.

Gross domestic product in the euro zone's two biggest economies rose unexpectedly by 0.3 percent in the quarter, boosting hopes of a lasting recovery and sending the euro rising against the dollar and yen.

"(The GDP figures are) better than expected and that supports the euro a little bit," said Antje Praefcke, currency strategist at Commerzbank in Franfurt. "But overall, it's still the effect of post-Fed trading with stocks being a little more on the positive side."

The euro climbed 0.4 percent to $1.4262 and was up 0.9 percent against the yen at 137.60.

The dollar drifted lower as investors switched to riskier assets such as commodities after the Fed on Wednesday gave its clearest statement to date that it saw the U.S. recession nearing an end. It was down a quarter percent against a basket of major currencies.

The Fed said the U.S. economy was showing signs of levelling out two years after the onset of the deepest financial crisis in decades and it moved to phase out one emergency measure.

It is the first time since August 2008 that the Fed's statement has not characterized the economy as contracting, weakening, or slowing. But it cautioned that the economy remains fragile as employers continue to cut jobs and businesses trim investment.

World stocks as measured by MSCI were up 0.8 percent on Thursday.

The FTSEurofirst 300 index of top European shares was up 1 percent at 951.34 points, led by banking shares such as UBS and Deutsche Bank, while mining shares such as Rio Tinto and Anglo American rallied along with metal prices.

Japan's Nikkei share average rose 0.8 percent, driven higher by big auto exporters and tech shares.

COMMODITIES ON THE RISE

The more positive Fed comments on the economy had pushed key U.S. stock indexes up more than 1 percent overnight, though shares lost steam near the end of the session.

At 0917 GMT on Thursday, futures for the S&P 500 were up 0.9 percent, Dow Jones futures were also up 0.9 percent and Nasdaq 100 futures were up 0.8 percent.

Oil gained $1.26 to $71.43 a barrel, helped by the upbeat data from Germany and France which fed optimism that the global economy was through the worst of the recession, overshadowing bearish U.S. inventory data.

Copper prices soared to their highest level since October, on a flurry of investor buying in the wake of the Fed's less gloomy comments on the U.S. economy.

Aluminium was also on the rise, while nickel touched reached its highest since late August 2008.

The yield on the benchmark 10-year U.S. Treasury note was 3.73 percent, relatively unchanged from late on Wednesday in New York. The 30-year yield was also almost unchanged at 4.54 percent, ahead of a $15 billion auction of that maturity later. (Additional reporting by Ian Chua in London; editing by David Stamp)

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