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Stock markets perky after US data

Pan Pylas, AP Business Writer

A man walks by an electronic stock board of a securities firm in Tokyo, Thursday, June 27, 2013. Stock markets from Sydney to Shanghai extended gains for a second day Thursday after the U.S. said quarterly growth may be weaker than expected, raising investors' hopes that the Federal Reserve would delay plans to wind down its stimulus program.(AP Photo/Koji Sasahara)

LONDON (AP) -- A round of solid U.S. economic data prompted a further bout of stock buying Thursday in another sign that the mood in financial markets has improved this week.

For much of June, investors have fretted about the possibility of the U.S. Federal Reserve reducing its monetary stimulus as the economy improves. Fed chief Ben Bernanke's confirmation last week that the central bank may start winding down its bond-buying program this year prompted turmoil across financial markets.

The fears of a change in Fed policy have led to stock markets falling on strong economic data and rising on weak indicators. That trend seems to have changed this week, however.

While Wednesday's downgrade of U.S. economic growth in the first quarter was cheered, at least by stock investors, Thursday's run of strong data on consumer spending, jobless claims and pending homes sales prompted the same sort of response.

That's a sign that investors think the recent sell-off in stock markets may have been overdone.

"There is a growing consensus that market participants overreacted to the proposed stimulus withdrawals with most traders of the view that shares can now be snapped up for bargain prices," said Max Cohen, a trader at Spreadex.

In Europe, the FTSE 100 index of leading British shares ended the day up 1.26 percent at 6,243 while Germany's DAX rose 0.6 percent to 7,990. The CAC-40 was 0.97 percent higher at 3,762.

In midday trading in the U.S., the Dow Jones industrial average was up 0.7 percent at 15,011 while the broader S&P 500 index rose 0.7 percent to 1,614.

Trading may increasingly be driven by calendar effects over the rest of the week as some investors look to make their portfolios look healthier for the end of the half-year. Even after the volatility over the past few weeks, stocks have had a pretty strong first half to the year.

"Traders may also be inclined to start undertaking a degree of position keeping in the near term — tomorrow marks the end of the month, quarter and mid-point of the year," said Fawad Razaqzada, market strategist at GFT Markets.

Earlier in Asia, markets were also buoyed as interbank lending rates in China continued to ease after a pledge earlier in the week by authorities to shore up banks facing cash shortfalls.

The central bank had allowed rates that banks pay to borrow from each other to soar last week, part of an attempt by Beijing to clamp down on massive credit in the informal lending industry.

Fears of a credit crisis in the world's second-biggest economy had contributed to a rout in global markets that ended when policymakers in China softened their stance with the promise to provide "liquidity support" if needed.

Japan's Nikkei 225 jumped 3 percent to close at 13,213.55 and Hong Kong's Hang Seng gained 0.5 percent to 20,440.08. South Korea's Kospi surged 2.9 percent to 1,834.70. Australia's S&P/ASX 200 added 1.7 percent to 4,811.30, a day after Julia Gillard was ousted as Prime Minister to be replaced by Kevin Rudd.

"He will be the person who will try to rescue Labour's election campaign, three months before Australians head to the polls, a move that appears to have received the approval of the markets," said Craig Erlam, market analyst at Alpari.

Trading in the currency markets was steady, though the dollar pushed higher after figures showed U.S. pending home sales rose 6.7 percent in May, the strongest rate in six years. The euro, which had been 0.3 percent higher, was broadly flat at $1.3021, while the dollar was 0.5 percent higher at 98.24 yen.

In the commodity markets, the mood was also calmer, notably with regard to gold, which slumped Wednesday to a near three-year low. It was up around 10 cents at $1,229.9 an ounce. The benchmark New York crude oil contract was up $1.79 at $97.28 a barrel.