US recession's end boosts markets

London - News that the United States emerged from recession drove up stock markets in Europe and the United States on Thursday as relieved investors reversed the previous day's heavy falls.

Data showed the US economy grew at an annualised 3.5% in the third quarter - the strongest expansion since the same period in 2007, when a home mortgage crisis triggered a global financial crunch.

"After pouring $1.4 trillion into the system and a cash-for-clunkers (car incentive) spree, US President Barack Obama can wipe the sweat of his brow and say hallelujah, Yes We Can drag the US economy kicking and screaming back to life," MF Global analyst Manus Cranny told AFP.

"A growth rate at 3.5% for the third quarter was better than even the most evangelical forecasts. Good news all round."

On Wall Street, the Dow Jones Industrial Average chalked up 1.32 percent in morning trades to 9 833.05. The tech-heavy Nasdaq rose 1.49% to 2 090.32 and the broad-market Standard & Poor's 500 added 1.57% to 1 058.96.

In Europe, London's FTSE index closed up 1.13% at 5 137.72 points. Frankfurt's DAX closed 1.66% higher at 5 587.45 points and in Paris the CAC 40 rose 1.37% to 3 714.02.

Asian equities had tumbled on Thursday amid stubborn recovery concerns.

The euro breached $1.48 after the US news boosted investor appetite for riskier assets, dealers said. In London, the European single currency rose as high as $1.4809, up from $1.4714 late Wednesday.

Despite the positive US data, analysts remained circumspect about the broader prospects for economic recovery.

"The recession is over, but don't be fooled by today's number," wrote Nariman Behravesh, chief economist at analysts IHS Global Insight. "The underlying rate of recovery is weaker."

Economist Paul Ashworth at Capital Economics said US growth would be strong "for another few quarters, as pent up investment demand is released, inventories are restocked and the boost to infrastructure spending from the fiscal stimulus continues."

But he added: "We suspect that all those positive factors will fade badly in the second half of next year."

Behravesh reckoned the real rate of US growth, adjusting for temporary factors, was "closer to two percent."

"Today's numbers overstate the strength of the recovery because of temporary factors including: the 'cash-for-clunkers' program, the tax incentives for first-time homebuyers and the big swing (rise) in the inventories" of companies.

The optimism over the US outlook bolstered markets which had earlier been cowed by weak earnings from major companies.

- AFP