August 14, 2012 / 3:12 AM / 6 years ago

German, French GDP data lift European shares

LONDON (Reuters) - European shares and the euro rose on Tuesday as slightly better than expected performances by the German and French economies in the second quarter countered data that showed the wider euro zone sliding back towards recession.

Traders work at their desks in front of the DAX board at the Frankfurt stock exchange February 2, 2012. REUTERS/Alex Domanski

After worrying China trade figures on Friday and Monday’s report showing a slowdown in Japan, Tuesday brought news that the euro zone economy contracted 0.2 percent in the April-June quarter, in line with forecasts from economists polled by Reuters.

Germany, however, managed growth of 0.3 percent, marginally ahead of expectations, while a stagnant French economy just avoided the slight economic contraction that had been forecast.

Austria and the Netherlands almost matched Germany’s performance, each posting growth of 0.2 percent, but Finland suffered a 0.7 percent year-on-year fall in GDP.

Top European shares, which took their biggest tumble in a week on Monday, were up 0.5 percent mid-morning. Indexes in London, Paris and Frankfurt were all higher, helping lift the global MSCI index.

U.S. stock index futures pointed to a higher open on Wall Street, with futures for the S&P 500, the Dow Jones and the Nasdaq 100 rising 0.2-0.3 percent.

The euro was up 0.3 percent at $1.2360, while demand for German government bonds, traditionally favored by risk-averse investors, dipped.

“There was a slight positive surprise from Germany and France, so that has helped lift the market,” said Aline Schuiling, senior economist at ABN Amro. “But the risks for Q3 remain to the downside, and the overall picture for the euro zone remains bleak,” she added.

CENTRAL HOPES

Global markets have rallied on hopes that new plans being drawn up by the European Central Bank to combat the euro zone debt crisis will bring some stability to the troubled bloc, and other major central banks are preparing to address faltering growth with fresh stimulus measures.

The scale of the euro zone’s troubles were highlighted by data showing that Spanish banks’ reliance on ECB funding aid hit an all-time high of 402 billion euros in July, and a warning from the Bundesbank that Germany’s economy was likely to deteriorate in the second half of the year.

German investor confidence figures from the ZEW institute also slid unexpectedly for a fourth straight month.

In the United States, retail sales and consumer prices later in the day will give an indication of how the world’s largest economy is faring.

Oil prices continued to tick up in response to escalating Middle East tensions, with Brent crude hitting its highest since early May. Gold tracked the climb, rising 0.4 percent to $1,615.20 an ounce.

Reporting by Marc Jones; Editing by Will Waterman

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