By Ishaq Siddiqi
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--European stocks markets were largely flat Friday, attempting to push higher on Wall Street's stellar performance overnight after U.S. third-quarter gross domestic product surprised to the upside and calmed nerves. Still, investors lacked conviction to push the market higher Friday, wary of putting more money on the table given the markets' current strength.
The better-than-expected and broadly-based rebound in U.S. third-quarter gross domestic product was greeted with a relief rally in risk assets "but we are reserving judgment on the sustainability of the bounce or whether this is an opportunity to sell," said Kenneth Broux, market economist at Lloyds Banking Group.
"We have pointed out how the early data points for October have disappointed and testify to a more sombre mood among U.S. households, risking deflating output in the fourth quarter," he said.
Despite inspiring investors to buy overnight, the U.S. GDP data release still included plenty of meat for the bears, notably the fact that 'cash for clunkers' auto sales contributed around half the growth. The jump in homebuilding may also have been driven by temporary incentives, said Ian Williams, strategist at Altium Securities.
At 0900 GMT, the Dow Jones Stoxx 600 index was up 0.3% at 242.59, London's FTSE 100 index was up 0.3% to 5154.25, Frankfurt's DAX index was flat, 0.1% lower at 5586.89, and the CAC-40 index in Paris was also flat, 0.1% higher at 3718.35.
Now that U.S. GDP has been cleared, there are another two short-term mines on the statistic road map, said Daniel Roy, head of equity derivatives strategy at Newedge Group. "First is the October final reading of the University of Michigan consumer confidence index, to be released 1355 GMT. Consensus may be high, at 70.0, when taking into account that the Conference Board consumer confidence indicator declined to 47.7 in October, from a prior reading of 53.5," he said.
And the October ISM manufacturing data are going to be another difficult release to go through, expected Nov. 2 at 1500 GMT, said Roy. "The first business day of every month is indeed the most volatile on equity markets, due largely to this," he added.
On Wall Street Thursday, the Dow Jones Industrial Average closed up 2.0% at 9962.58, marking its biggest point gain since July 15 and its biggest percentage move since July 23. With the surge, the Dow is only 1.3% from its 2009 closing high of 10,092.19, hit on Oct. 19.
Among other measures, the Standard & Poor's 500 rose 2.2% to 1066.11, breaking a string of four straight losses. With one day left for October, the S&P 500 is up 0.8% for the month.
Earnings had little to do with the session's gains, as traders cheered the GDP figure. After early-week reports on housing, durable goods and consumer sentiment drove investors out of riskier assets, the GDP data helped drive traders back into stocks, commodities and other riskier assets.
"I don't think anyone was surprised it was a positive number, but it certainly took a little bit of this week's fear off the table as people were feeling pretty stressed," said Bernie McSherry, senior vice president with New York Stock Exchange floor broker Cuttone & Co.
The positive finish on Wall Street lent Asian markets support Friday, with the U.S. GDP data restoring some confidence in recovery prospects in the region following Thursday's losses.
Hong Kong's Hang Seng index was up 2.2% while China's Shanghai Composite was 1.1% higher. Japan's Nikkei 225 closed up 1.4%.
Still, some analysts were doubtful the gains would last. "The market doesn't seem convinced that today's recovery is the end of the downward correction," said Potter. "I wouldn't be surprised if we see further falls. The question will be what traders do in two or three days' time - will they continue to buy or sell the rally? My gut feeling is that they will sell it," Potter added.
In the European foreign exchanges, the increase in risk appetite continued to boost currencies like the euro early Friday. At 0910 GMT, the single currency was trading at $1.4832, up from $1.4822 late in New York. The dollar was slightly lower against the yen, down to Y90.91 from Y91.41.
Meanwhile, spot gold moved higher, trading at $1044.85 at 0910 GMT, up $13.47. In the oil market, crude oil remained steady after rising Thursday on hopes of a U.S. economic recovery. At 0910 GMT, Nymex December crude was down 16 cents from New York, at $79.71 per barrel.
Elsewhere, European bond markets opened steady, with little sign of the strength of the equity markets or the desire for risk resulting in more selling in the sovereign debt market. At 0910 GMT, the December bund contract stood at 121.45, up 0.24.
-By Ishaq Siddiqi, Dow Jones Newswires; +44-20-7842-9488; ishaq.siddiqi@dowjones.com
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