European stocks were higher Thursday, gaining support from a rally in the second half of Wednesday's session on Wall Street.
The U.K. FTSE 100 index rose 0.8% to 5461.58, Germany's DAX advanced 0.7% to 5892.90 and France's CAC-40 index gained 0.7% to 3957.73.
However, stocks could come under pressure after data showed China's economy expanded by 10.7% year-to-year in the fourth quarter of 2009, fueling fears of monetary tightening measures from Beijing.
On the corporate front, U.S. earnings releases are likely to take center stage again, with Goldman Sachs, American Express and Google all scheduled to report. American Express is expected to report earnings of around 56 cents a share, while Goldman Sachs and Google are seen reporting $5.20 and $6.45 a share, respectively, said Michael Hewson at CMC Markets.
On the economic calendar, highlights include the euro-zone purchasing managers' index at 9 a.m. GMT, the U.K. public finance data at 9:30 a.m. GMT and the CBI industrial trends survey at 11 a.m. GMT. In the U.S., weekly jobless claims and the Philadelphia Fed manufacturing index are due at 1:30 p.m. GMT and 3 p.m. GMT respectively.
On Wall Street Wednesday, stocks fell broadly in early business as worries over monetary tightening in China weighed on the shares of commodity-related companies including Alcoa and Chevron, while investors were disappointed with the 2010 earnings forecast from International Business Machines.
The Dow Jones Industrial Average fell 122.28 points, or 1.1%, to 10,603.15, marking its biggest one-day drop so far this year. IBM was its worst performer, off $3.89, or 2.9%, at $130.25. The tech giant's fourth-quarter profit rose 8.7% as margins improved and revenue inched up. However, its profit outlook for 2010 implied year-over-year growth of 10%, which looked conservative to investors after a 13% increase in 2009.
Kraft Foods also weighed on the Dow, with a drop of 63 cents, or 2.1%, to $28.78, after investment sage Warren Buffett gave a big thumbs down to the U.S. food giant's deal to buy Cadbury for $19.44 billion.
The Dow was also pulled lower by its commodity-related components. Alcoa tumbled 39 cents, or 2.5%, to $15.23, while Chevron dropped $1.53, or 1.9%, to $78.15 and Exxon Mobil fell $1.24, or 1.8%, to $68.03. The declines came after a report the China Banking Regulatory Commission had asked several banks to stop issuing loans.
Among other measures, the technology-heavy Nasdaq Composite fell 29.15, or 1.3%, to 2291.25 while the Standard & Poor's 500 index dropped 12.19, or 1.1%, to 1138.04.
In Asia, shares traded mostly higher Thursday, recouping losses from earlier in the session, when stocks fell after the economic data from China sparked fears of further monetary tightening measures.
The overall macro picture in China "is one with continued strength in activity growth and rapidly rising inflation," said Goldman Sachs economists in a note. "We believe further policy tightening measures over and beyond what have already been implemented are needed in order to control inflation in the coming months."
The rise in China's fourth-quarter growth domestic product of 10.7% year-to-year was broadly in line with the 10.8% forecast by a Dow Jones poll, while China's consumer price index rose 1.9% in December.
China's Shanghai Composite was 0.2% higher and Japan's Nikkei 225 was up 1.2%, but Hong Kong's Hang Seng index fell 1.5%.
Some commentators said the Chinese data were not all doom and gloom. "CPI jumped quite a bit in December, so that may have unnerved the markets, but the downside is limited as the growth is still intact," said Amy Lin at Capital Securities in China.
In the European currency markets Thursday, the euro was trading at $1.4100, down from $1.4107 in late New York trading Wednesday, having fallen to a fresh five-month low against the dollar in Asia Thursday after China's strong economic data. The pound was quoted at $1.6261, down from $1.6292, while the dollar was trading at ¥91.53, up from ¥91.25.
Elsewhere, spot gold was trading at $1114.90 per troy ounce, up $2.95 from the New York close, after dropping more than 2% overnight. But Nymex March crude oil futures were down 26 cents at $78.00 per barrel. And the European government bond markets opened lower, with the March bund future down 0.12 at 122.92.
