World stocks rallied strongly Thursday as investors put Europe's debt problems to one side — for now — after China insisted it was not going to back out of euro investments.
Strong Asian economic growth figures and further confirmation that the U.S. economy continues to grow at a fairly strong rate helped shore up markets through the day.
European markets followed their Asian counterparts higher, with the FTSE 100 index of leading British shares closing up 157.09 points, or 3.1 percent, at 5,195.17 while Germany's DAX surged 179.12 points, or 3.1 percent, at 5,937.14. The CAC-40 in France ended 116.72 points, or 3.4 percent, higher at 3,525.31.
On Wall Street, stocks posted solid gains even though U.S. growth figures came in slightly lower than anticipated — the Dow Jones industrial average was up 149.41 points, or 1.5 percent, at 10,123.86 around midday New York time, while the broader Standard & Poor's 500 futures rallied 19.36 points, or 1.8 percent, at 1,087.31.
U.S. growth figures did nothing to dispel the optimism that emerged earlier following a string of upbeat Asian economic reports — even though the Commerce Department reported that the world's largest economy grew at a 3 percent annual rate from January to March, slightly down on the initial estimate of 3.2 percent a month ago and expectations for a modest increase to 3.4 percent, U.S. economic growth remains strong especially when compared with its major competitors.
"Today's data indicates that the economic recovery is in full swing, despite the lagged rebound in employment and confidence," said Michael Woolfolk, an analyst at Bank of New York Mellon.
The market rally was triggered earlier by upbeat activity in Asia and a sharp denial Thursday from Chinese authorities that they are reviewing their holdings of euro-denominated assets.
The agency that manages China's $2.5 trillion foreign reserves denied a Financial Times report that China was considering cutting its exposure to European assets and expressed confidence Europe will restore its financial stability.
China's State Administration of Foreign Exchange, which rarely comments on its activities, said talk of a review was "groundless" and stressed that the European market "in the past, present and future always will be one of (its) the major investment markets."
That sharp denial helped ease concerns that the euro would lose one of its major props and the single currency spiked 1.3 percent to $1.2316 — earlier fears of a Chinese exodus had sent the currency plunging to $1.2155 and near its four-year low posted to $1.2146.
The rebound in sentiment has helped oil prices rally too — benchmark crude for July delivery was up $2.53 to $73.07 a barrel in electronic trading on the New York Mercantile Exchange.
Worries about the European debt situation have not disappeared overnight though — the last few months have been periodically interspersed by periods of relative optimism.
"Although it is has been a strongly positive day we may need to see a little more confirmation yet to suggest we are out of the woods," said David Jones, chief market strategist at IG Index.
"The problem of surprising developments regarding the European debt situation still remains, so expectations are that investors are going to be treading warily over the weeks to come," he added.
Earlier, robust first-quarter economic figures from China, Japan, Singapore, Taiwan and Malaysia, had raised hopes the region can absorb any downturn in Europe.
In Asia, Japan's Nikkei 225 stock average rose 1.2 percent to 9,639.72 while South Korea's Kospi jumped 1.6 percent to 1,607.50. Australia's S&P/ASX 200 index gained 1.7 percent to 4,379.10.
Hong Kong's Hang Seng added 1.2 percent to 19,431.37 and benchmarks in China, Singapore, Thailand and Malaysia all rose more than 1 percent.
Simon Johnson, a professor at MIT and a former chief economist at the International Monetary Fund, thinks that the doom and gloom in the markets may have been overdone and that emerging markets and the U.S., in particular, are poised for a period of above-average growth.
"People are often way too pessimistic after crises," said Johnson.
© Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.