Upbeat US growth figures support markets

By Pan Pylas

Associated Press

Published: Wednesday, Feb. 29 2012 8:10 a.m. MST

A man walks in front of the electronic stock board of a securities firm in Tokyo, Wednesday, Feb. 29, 2012. Japan's Nikkei 225 index rose 1.3 percent to 9,846.46. Asian stock markets rose Wednesday, powered higher by the strongest close for U.S. stocks since before the 2008 financial crisis.

Itsuo Inouye, Associated Press

LONDON — Markets were shored up by upbeat U.S. economic growth figures on Wednesday after investors appeared unimpressed by news that demand for the European Central Bank's emergency loans to banks was bigger than expected.

The ECB said it made €529.5 billion ($712.4 billion) in low-interest loans to banks in the second round of its long-term credit infusion, which has been widely credited with easing the eurozone debt crisis.

The uptake of the long-term refinancing operation, or LTRO, was modestly higher than the €489 billion ($657.9 billion) handed out to 523 banks at a first offering on Dec. 21, and was slightly higher than market expectations. The offer of credit for three years was taken up by 800 banks, again more than anticipated.

After the details of the offering, the euro and European stock markets dropped slightly as investors worried that the higher take-up may be a sign of continued stress in Europe's banking system.

However, an upward revision to fourth quarter U.S. economic growth figures, to an annualized rate of 3 percent from the previous estimate of 2.8 percent, lent support as Wall Street opened. Growth during the quarter was the strongest since the spring of 2010.

"The headline beat expectations by a modest margin, which helped to feed into positive sentiment," said Michael Woolfolk, an analyst at the Bank of New York Mellon.

In Europe, Germany's DAX was up 0.7 percent at 6,938 while the CAC-40 in France was 0.8 percent higher at 3,481. The FTSE 100 index of leading British shares was 0.1 percent higher at 5,932. The euro was down 0.1 percent at $1.3452.

In the U.S., the Dow Jones industrial average was up 0.3 percent at 13,042 while the broader Standard & Poor's 500 index rose by the same rate to 1,376.

Most of the world's leading indexes are back at levels they were trading at before last summer's massive sell-off. Stronger-than-anticipated U.S. consumer confidence figures on Tuesday also helped push the Dow to close at 13,005.12 on Tuesday. The last time the benchmark closed above 13,000 was in May 2008, four months before the fall of the Lehman Brothers investment bank and the worst of the financial crisis.

The ECB's first round of three-year loans last December is often cited as one of the reasons why markets been so buoyant this year as they eased concerns of an imminent credit crunch in Europe.

Banks used some of the money from the first round of loans to buy government bonds. That lowered borrowing costs for hard-pressed governments struggling to maintain large amounts of debt, and eased fears of a market meltdown from Europe's troubles with too much government debt.

"The ECB's LTRO should provide further confidence that Europe's banks will have sufficient funding to weather the region's likely mild recession," said Benjamin Reitzes, an analyst at BMO Capital Markets.

Earlier in Asia, Japan's Nikkei 225 index edged up slightly to close at 9,723.24 after the government released a report that showed factory production rising for a second straight month in January.

Hong Kong's Hang Seng gained 0.5 percent to 21,680.08 and South Korea's Kospi gained 1.3 percent to 2,030.25.

But on mainland China, the benchmark Shanghai Composite Index lost 1 percent to 2,428.49 while the Shenzhen Composite Index fell 1.3 percent to 956.99.

Mainland Chinese shares fell after Shanghai announced that — contrary to recent reports — it would not ease restrictions on

Investors are also anticipating the Federal Reserve's so-called Beige Book report on economic activity, due later Wednesday. The report is expected to reflect a slowly improving U.S. economy.

Oil prices ticked higher alongside equities — benchmark oil for April delivery was up 18 cents at $106.73 a barrel in electronic trading on the New York Mercantile Exchange.

Pamela Sampson in Bangkok contributed to this report.

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