US growth delivers market boost

The Nikkei has mirrored worldwide market instability

Shares have climbed in the US and Europe aided by corporate deals and flotations, amid signs of inflation-proof US economic growth.

By 1700 GMT, Wall Street's Dow Jones index was up 0.56%, after US growth proved better than originally estimated but lower than some had predicted.

London's FTSE and France's Cac rose 1.6%, with Germany's Dax adding 2.1%.

But the unease gripping global markets for the past two weeks lingered in earlier sharp falls on Asian markets.

Inflation fears

The 5.3% annual GDP growth registered in the US for the first three months of 2006 was three times the rate of the previous quarter.

But it was still lower than many economists were expecting.

Fears of resurgent inflation - and thus a rise in the cost of borrowing - have been a key driver behind the recent market gyrations, so US analysts took the reading as a good omen.

The first day of trading for shares in credit card firm Mastercard - its stock soared as much as 15% during the day - and an advertising deal between internet heavyweights Yahoo and eBay also helped keep the mood buoyant.

By 1700 GMT, not long after the half-way point of the day, the Dow Jones Industrial Average was up 62.37 points at 11,179.69, with the broader S&P 500 adding 9.29 points or 0.74% to 1,267.86.

Heading higher

In Europe, the day had begun with broad-based but slim gains, although France's bourse had started in the red.

Revived prices for commodities such as copper had boosted mining stocks.

Once the US GDP figures came through, however, all Europe's big three markets gathered steam.

The FTSE 100 ended the day 90.6 points or 1.62% higher at 5,677.7.

Similarly in Europe, the Cac 40 rose 79.51 points or 1.63% to 4,949.53, with Frankfurt's Dax soaring 118.83 points or 2.13% at 5,706.06.

Still, few believe Thursday's rally will see an end to the tremors in global sentiment.

Investors remain worried about the potential for higher borrowing costs, which would put a brake on consumer spending and corporate investment, and so squeeze profits and jeopardise growth.

Market watchers expect markets to slowly stabilise, with a lot depending on the quality of earnings and economic reports released in coming weeks, and whether global commodity prices continue to fall back from recent record highs.