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Upbeat US news helps turn around market gloom

Upbeat US news helps turn around market gloom

European stock markets recouped losses Tuesday after Wall Street unexpectedly rose at the open after upbeat U.S. corporate earnings and a stronger than anticipated consumer confidence survey combined to offset the gloom that had gripped investors' for most of the session.
In Europe, Germany's DAX rose 42.96 points, or 0.8 percent, to 5,674.33 while France's CAC-40 rose 9.75 points, or 0.3 percent, to 3,791.60. The FTSE 100 index of leading British shares was 4.34 points, or 0.1 percent, higher at 5,264.65.
Europe's main indexes had traded lower earlier following big losses in Asia in the wake of reports that China's banks faced additional lending curbs. However, an unexpected advance in the U.S. helped European markets push to day highs.
The Dow Jones industrial average was up 29.10 points, or 0.3 percent, at 10,255.96 soon after the open while the broader Standard & Poor's 500 index rose a tiny amount to 1,097.13.
The early gains on Wall Street came after a batch of solid earnings from the likes of insurer Travelers Cos., chemical company DuPont and technology company Apple Inc. and a survey from the Conference Board showed U.S. consumer confidence in January rose to its highest level since September 2008 when sentiment fell off a cliff following the collapse of Lehman Brothers.
Investors are not getting carried away though, as the prevailing mood in the markets over the last week or so has been downbeat. Concerns about the speed of the global economic recovery after figures showed Britain emerging from recession at a snail's pace and worries over Japan's debt load and further lending curbs in China had weighed on markets earlier.
They are particularly vexed over possible policy changes in China, as the country's growth helped limit the impact of the global recession over the last year _ figures last week showed that China's economy grew an eye-catching 10.7 percent in the final three months of the year from the year before.
The worry is that tighter monetary policy in China to check inflationary pressures could kill off the nascent economic recovery around the world.
Neil Mackinnon, global macro strategist at VTB Capital, said the Shanghai Composite, which closed 2.4 percent lower at a three-month low of 3,019.39, is probing its 200-day moving average of 2,986.
"The index needs to hold this level otherwise a deeper correction is in prospect, which would weigh on other equity markets," said Mackinnon.
And the economic data around the world suggests that the recovery is not on a sure footing.
Figures Tuesday showed that Britain finally emerged from recession in the last three months of 2009 _ after six consecutive quarters of falling output _ but only at a quarterly rate of 0.1 percent as the services sector barely grew. That was way less than the 0.4 percent consensus in the markets.
The weak growth rate hit the pound hard, pushing it down over a cent at one stage following the data's release to $1.6094. However, some skepticism about the reliability of the growth figures helped the pound stage a modest recovery to $1.6133.
"My experience in looking at data like this for nearly 40 years is that if the official GDP data disagrees with both the data from the labour market and the data from business surveys, the GDP data is probably wrong," said Douglas McWilliams, chief executive of the Centre for Economic and Business Research. The figures are a first estimate and subject to revision.
Meanwhile, equivalent figures in South Korea did little to excite investors _ fourth quarter growth there slowed to just 0.2 percent because of weakness in manufacturing, construction and exports.
Further weighing on sentiment was the news that Standard & Poor's is considering lowering its double-A credit rating on Japan as it reduced its outlook to negative from stable.
Key insight into the economic recovery in the U.S. will come Wednesday when the Federal Reserve completes its latest two-day rate-setting meeting. Though the Fed is expected to keep its benchmark interest rate unchanged, investors will be particularly interested to see the accompanying statement.
Elsewhere in Asia, Japan's Nikkei 225 stock average retreated 187.41 points, or 1.8 percent, to 10,325.28 and South Korea's Kospi shed 32.86 points, or 2 percent, to 1,637.34.
Hong Kong's Hang Seng sank 489.22 points, or 2.4 percent, to 20,109.33 and Taiwan's index plunged 3.5 percent.
Elsewhere, Singapore's market was down 2.4 percent and Thailand retreated 0.6 percent. Indian and Australian markets were closed for public holidays.
Oil prices fell to near $74 a barrel amid signs of faltering global demand. Benchmark crude for March delivery was down $1.20 at $74.06 in electronic trading on the New York Mercantile Exchange.
The euro fell 0.7 percent to $1.4055 while the dollar dropped 0.6 percent to 89.65.
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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.