US economic hopes give markets a lift

LONDON (AP) -- A run of upbeat U.S. economic indicators helped shore up sentiment in the markets Thursday despite disappointing earnings from Bank of America and Citigroup.

As has been the case for much of this year, the U.S. was main focus of attention in markets. Relief that lawmakers agreed to a budget deal that prevented tax increases and spending cuts at the start of the year had helped many stock indexes around the world to advance to multiyear highs.

However, that momentum ground to a halt this week as investors wondered whether there was any upside, particularly in the value of stocks.

The positive U.S. economic data Thursday suggested there may be. Weekly jobless claims fell 37,000 to 335,000, their lowest level in five years, while a gauge of the housing market reinforced the view that the sector is on the mend after years of decline. Housing starts jumped a monthly 12.1 percent to an annualized rate of 954,000, their highest since June 2008.

As a result, a trading session that had been marked by a lack of momentum burst into life.

In Europe, the FTSE 100 index of leading British shares rose 0.5 percent to close at 6,132.36 while Germany's DAX rose 0.6 percent to 7,735.46. The CAC-40 in France was 1 percent higher at 3,744.11.

On Wall Street, the Dow Jones industrial average rose 0.6 percent to 13,585.25 while the broader S&P 500 index rose 0.5 percent to 1,479.91. Worse than expected results from Bank of America and Citigroup did little to alter the prevailing mood.

Andrew Wilkinson, chief economic strategist at Miller Tabak & Co., said the housing figures, in particular, raise confidence that "a spreading recovery will overflow into broader consumption habits and further permeate the economy."

If the U.S. economy, the world's largest, enjoys such an outturn, that would be a boon to the global recovery, and potentially ease some of the problems that exist elsewhere, not least in Europe.

"We think the economy is set for a great 2013 and the stock market looks set to break higher," said Wilkinson.

It's not all clear for the U.S. economy, though. Another looming battle in Congress over raising the U.S. debt ceiling is on the cards. Fitch has already warned that it may strip the U.S. of its triple A rating if there's a delay in raising it.

Earlier in Asia, Japan's Nikkei 225 index swung between gains and losses before closing nearly 0.1 percent higher at 10,609.64. On Wednesday, the Nikkei slid around 2.6 percent after investors interpreted comments from economy minister Akira Amari as suggesting he was concerned over the sharp fall in the yen in recent weeks.

"That misunderstanding has been cleared up by Amari, who clarified that he meant that the yen is still in the process of correcting back into line with fundamentals," said Lee Hardman, currency analyst at the Bank of Tokyo-Mitsubishi UFJ.

The impact of his comments on the yen was short-lived, with the dollar up 1.3 percent at 89.57 yen on Thursday. Elsewhere, the euro was 0.4 percent higher at $1.3344.

South Korea's Kospi fell almost 0.2 percent to 1,974.27 while Hong Kong's Hang Seng changed direction after posting morning gains, slipping 0.1 percent to 23,339.76. Mainland China's Shanghai Composite Index fell 1.1 percent to 2,284.91 ahead of Friday's economic growth figures, which could provide broader direction across markets on the last day of the week.

Oil prices followed equities higher, with the benchmark New York contract up $1.19 at $95.43 per barrel in electronic trading on the New York Mercantile Exchange.