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Markets remain subdued after soft US data

Pan Pylas, AP Business Writer

A woman watches an electronic stock board of a securities firm in Tokyo, Thursday, May 16, 2013. Asian stock markets were mixed Thursday following dour European economic data that dampened hopes of a recovery there anytime soon. However, losses were limited by another record session on Wall Street. (AP Photo/Koji Sasahara)

LONDON (AP) -- Financial markets were subdued Thursday despite encouraging growth figures out of Japan, as investors digested a mixed batch a U.S. economic data a day after Wall Street indexes hit record highs.

One of the reasons why stocks have been buoyant for most of this year has been optimism over the U.S. economy. But a 32,000 rise in weekly jobless claims to 360,000 and a fairly downbeat manufacturing survey from the Philadelphia Fed raised questions about the underlying health of the world's largest economy.

The impact on the markets was muted, however, given that a 0.4 percent fall in monthly consumer prices, which took the annual rate down to a two and a half year low of 1.1 percent, suggested that the Federal Reserve won't be in a rush to end its super-easy monetary policy soon. The Fed's monetary injections over the past few years have lain behind the recovery in stock markets since 2009.

"Optimism abounds, and with inflation concerns starting to ignite concern for more rather than less bond buying ahead, it does not seem rational to sell stocks on the view that the economy may be slowing," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.

In Europe, Germany's DAX rose less than 0.1 percent to close at 8,369.87 while the CAC-40 in France fell 0.1 percent to 3,979.07. The FTSE 100 of leading British shares also ended 0.1 percent lower at 6,687.80.

On Wall Street, the Dow Jones industrial average was up 0.1 percent at 15,285.19 while the broader S&P 500 index was flat at 1,658.85.

Japan was in focus earlier after figures fueled hopes of an economic turnaround in the country. A day after the latest set of data showed that the eurozone — the 17 European Union countries that use the euro — was in its longest recession since the currency was launched in 1999, Japanese data impressed on the upside.

Stronger consumer spending and public works investment coupled with aggressive monetary easing gave some oomph to the recovery. Japan's economy grew by a stronger-than-expected 3.5 percent in annual terms and by 0.9 percent on a quarterly basis, according to figures reported by the Cabinet Office on Thursday.

The forecast-busting data provides the first tangible evidence that the economic policy of the new government of Prime Minister Shinzo Abe is working.

Abe promised aggressive steps to restart the country's postwar boom, which effectively ground to a halt in the early 1990s. As part of that effort, the Bank of Japan plans to double the amount of cash circulating in the Japanese economy and held as bank reserves.

One of the offshoots of the policies has been a dramatic fall in the value of the yen, and that's boosted the export prospects of the country's businesses, lifting the Nikkei 40 percent this year.

The Nikkei didn't extend those gains Thursday, losing 0.4 percent to close at 15,037.24 as investors used the release as an opportunity to book some gains.

"If you're looking for a clear example of the markets currently moving in a way that is unrelated to the quality of the data, then look no further than the movement in the Nikkei," said Craig Erlam, market analyst at Alpari.

Despite the modest retreat in Tokyo, most other Asian markets advanced. Hong Kong's Hang Seng rose 0.2 percent to 23,082.68. while South Korea's Kospi added 0.8 percent to 1,986.81. China's main index in Shanghai ended 1.2 percent higher at 2,356.80.

Currencies were steady, with the euro up 0.1 percent at $1.2898 and the dollar flat against the Japanese yen, at 102.22 yen.

Oil prices eked out some gains, with the benchmark New York rate up 99 cents to $95.29 per barrel.