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World stocks up as data shows US economic upswing

Pamela Sampson, AP Business Writer

In this Thursday, June 20, 2013 photo, specialist Stephen Ruiz, left, and trader Michael Smyth work on the floor of the New York Stock Exchange. Asian stock markets were mostly lower Tuesday June 25, 2013 as investors continued their flight from risky assets on the prospect of slower Chinese growth and the winding down of the U.S. Federal Reserve's monetary stimulus. European markets rebounded. (AP Photo/Richard Drew)

BANGKOK (AP) -- Global stock markets staged a modest recovery Wednesday, boosted by strong data releases that portray a U.S. economy on the upswing.

New home sales, bigger factory orders and rising consumer confidence helped allay fears about state of the U.S. economy, the world's biggest. The data came on the heels of comments by China's central bank that eased fears of a credit crunch in the world's No. 2 economy. Developments in both countries helped boost appetite for stocks, analysts said.

"The firmer data came alongside soothing comments from China's central bank about liquidity conditions in the banking sector," Mitul Kotecha at Credit Agricole CIB in Hong Kong said in a commentary.

China's central bank caused a global rout in markets on Monday after it moved to curb so-called shadow banking — unregulated lending to companies starved of credit by traditional banks. Investors worried that would cause an increase in borrowing rates for companies, hurting business. On Tuesday, the central bank issued a statement saying it would act to keep credit markets functioning, if needed.

Britain's FTSE 100 advanced 0.8 percent to 6,147.89. Germany's DAX rose 1.2 percent to 7,902.70. France's CAC-40 gained 1.2 percent to 3,694.77.

Wall Street appeared set for gains. Dow Jones industrial futures rose 0.3 percent to 14,729. S&P 500 futures added 0.3 percent to 1,586.20.

Mainland Chinese shares were mixed after enduring sharp losses earlier this week. China allowed interbank lending rates to soar overnight Thursday, an attempt by Beijing to clamp down on massive credit flows in the informal lending industry. Small- and medium-sized businesses that have largely been denied access to formal lending channels from the country's major banks often turn to off-the-books lenders for needed cash. But that has provoked fears of potentially destabilizing credit bubble.

Francis Lun, chief economist at GE Oriental Financial Group in Hong Kong, said the crunch on cash reflects the thinking of Chinese Premier Li Keqiang, who assumed his post in March.

"He is a market economist. I think he doesn't want the government to prop everything up," Lun said. "He is determined to bleed the air from the real estate bubble and the lending bubble. So he put a squeeze on the banks."

The Shanghai Composite Index fell 0.4 percent to 1,951.50. But the smaller Shenzhen Composite Index jumped 2.5 percent to 901.72. In Hong Kong, the Hang Seng surged 2.4 percent to 20,338.55.

Japan's Nikkei 225 fell 1 percent to close at 12,834.01. South Korea's Kospi reversed early losses to rise 0.2 percent to 1,783.45. Australia's S&P/ASX 200 gained 1.6 percent to 4,731.70.

Analysts said they had confidence that China, the world's No. 2 economy, would be able to continue growing, albeit at a slower pace.

"Overall, we believe that markets need not panic that China is about to experience a hard landing ... Beijing has enough time and resources to stimulate the economy and is unlikely to accept missing" its 7.5 percent growth forecast for 2013, Credit Agricole said.

Chinese banking stocks posted solid gains. The Industrial & Commercial Bank of China, the world's biggest bank by market value, rose 4.3 percent in Hong Kong. China Construction Bank advanced 3.9 percent.

Wall Street stocks closed higher after reports showed sales of durable goods rose 3.6 percent last month while house prices jumped 12.1 percent in April. A separate report showed sales of new homes accelerated in May to their fastest pace in five years, with sales rising 2.1 percent. Consumer confidence also increased.

The data underscores the message last week from the Federal Reserve, which plans to slow its bond-buying program this year and end it next year, if the economy continues to strengthen. The Fed's bond purchases have helped keep long-term interest rates low.

Benchmark oil for August delivery was down 43 cents to $94.95 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 14 cents to end at $95.32 a barrel on Tuesday.

In currencies, the euro fell to $1.3058 from $1.3090 late Tuesday in New York. The dollar rose to 97.53 yen from 97.75 yen.