Markets rise after more positive China news

Pan Pylas, AP Business Writer

LONDON (AP) -- Another round of largely better than expected Chinese economic data lifted the mood in financial markets on Friday, though trading volumes were low due to the traditional summer lull.

Figures showed inflation in July steady at an annual rate of 2.7 percent. That was below market expectations for a modest increase to 2.8 percent. Meanwhile, industrial production rose 9.7 percent in the year to June, ahead of expectations for a 9 percent increase. The only modest disappointment was the news that retail sales grew 13.2 percent in July from a year earlier, slightly slower than June's growth rate.

Overall, analysts said the figures added weight to the argument that the recent soft patch in the world's second-largest economy may have come to an end. Market reaction was initially muted, as stocks had rallied already on Thursday after strong Chinese trade numbers. But as the day wore on European stocks in particular gained ground.

"While we didn't get the reaction to the data that we saw yesterday, following the trade balance figure, I'd say the data out of China over night was actually quite positive," said Craig Erlam, market analyst at Alpari.

In Europe, the FTSE 100 index of leading British shares was up 1 percent at 6,595.15 while Germany's DAX rose 0.6 percent to 8,371.60. The CAC-40 in France was 0.5 percent higher at 4,086.15.

Mining companies, particularly in Britain, were the big gainers, as the Chinese data promised continued demand for raw materials from the country's big manufacturers.

On Wall Street, the Dow and the S&P 500 were both flat, at 15,495.56 and 1,697.97.

Analysts think U.S. markets may drift in the run-up to the weekend. Trading levels in the U.S. in particular often dry up in the latter part of August and only pick up again once traders return to their desk following the Labor Day holiday in early September.

"Bereft of economic news, U.S. markets may struggle," said Chris Beauchamp, market analyst at IG.

Currency markets were fairly subdued, too, with the euro 0.2 percent lower at $1.3360 and the dollar down 0.4 percent at 96.32 yen.

Earlier in Asia, Japan's Nikkei 225 index ended 0.1 percent higher at 13,615.19 while South Korea's Kospi closed 0.2 percent lower at 1,880.71.

The mood in China was a bit more positive after the figures. The Shanghai Composite Index gained 0.4 percent to 2,052.24 and the Shenzhen Composite Index for China's second, smaller stock market gained 0.2 percent to 996.42. Hong Kong's Hang Seng gained 0.7 percent to 21,807.56.