World stocks buoyed by Asian data, US oil demand

LONDON — World stock markets rose Friday after encouraging economic news out of Asia and positive oil inventory data out of the U.S. encouraged investors to believe that the world’s largest economy is showing more signs of life and demanding more oil.

In Europe, the FTSE 100 index of leading British shares was up 57.34 points, or 1.3 percent, at 4,444.88 while Germany’s DAX rose 70.88 points, or 1.4 percent, to 5,003.76. The CAC-40 in France was 42.36 points, or 1.3 percent, higher at 3,306.06.

Dow futures were up 47 points, or 0.6 percent, at 8,431 while the S&P 500 futures rose 5.6 points, or 0.6 percent, to 910.70.

World stocks got a boost from the news that Japanese industrial production jumped at its fastest pace in 56 years in April and India’s economic slowdown eased.

In Japan, industrial output jumped 5.2 percent in April as companies raised production following drastic cutbacks because of the unprecedented drop in demand late last year. And India’s economy grew 5.8 percent in the first three months of 2009 from a year earlier, the same rate as the previous quarter, but much better than many economists had expected.

Also buoying stock markets was the news Thursday that U.S. oil supplies dropped unexpectedly by 5.4 million barrels last week. Though crude inventories remain near 19-year highs, it was the third week in a row that supplies have fallen.

“Positive oil inventory data gave further credence to the ‘green shoot’ scenario,” said David Buik, markets analyst at BGC Partners.

The inventory data helped the Dow Jones industrial average add 103 points to 8,403.80 Thursday and the broader Standard & Poor’s 500 index to close 12.5 points up at 906.83.

The U.S. oil news has also helped crude prices rise to six-month highs. Benchmark crude for July delivery was up 85 cents to $65.93 a barrel, following the $1.63 rise overnight.

Nevertheless, analysts cautioned that the sustained increase in the price of oil coupled with an increase in long-term U.S. interest rates have the potential to derail a global economic recovery.

As a result, stock markets this week have been extremely volatile.

Despite the recent lull — the Dow has lost ground for five out of the last seven days — stocks around the world have rallied strongly over the last few weeks, with some major indexes moving into positive territory for the year.

The trigger for the gains has been better than expected economic news, particularly in the U.S., which has fueled an increase in appetite for risk on hopes that the global recession is receding. Stock markets usually start recovering between 6-9 months before an actual economic recovery emerges.

There are some concerns that the markets, having rallied since March, are now being largely driven by speculative capital flows searching for short-term returns, and that the liquidity boost from the world’s central banks, particularly from the U.S. Federal Reserve, over the last few months has pushed stock prices above what many companies can actually earn without a dramatic pick up in economic activity in the coming months.

Earlier in Asia, Japan’s Nikkei 225 stock average gained 71.11 points, or 0.8 percent, to 9,522.50 while Hong Kong’s Hang Seng added 285.73, or 1.6 percent, to 18,171.00.

South Korea’s Kospi was up 0.3 percent, and Australia’s key index climbed 1.7 percent. Financial markets in mainland China and Taiwan were closed Friday for a holiday. India’s Sensex advanced nearly 3 percent.

The dollar fell to 96.05 yen from 96.76 yen. The euro was higher at $1.4075 from $1.3939 despite the news that inflation in the euro zone fell by more than anticipated in May.

The European Union first estimate of 0.0 percent inflation was down from the 0.6 percent increase recorded in April and analysts’ forecasts for a 0.2 percent rise.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.