European stock markets downbeat on poor growth data

European stock markets rose Thursday after poor German and French economic data fueled speculation that the European Central Bank would be forced to roll out stimulus measures.
In afternoon trading, Frankfurt's DAX 30 index added 0.41 percent to 9,236.38 points, while in Paris the CAC 40 gained 0.28 percent to 4,207.85.
London's benchmark FTSE 100 index rose 0.48 percent to stand at 6,688.46 points ahead of British growth data due on Friday.
In light of figures that showed the German and French economies grinding to a halt "we still believe that the ECB needs to implement further policy action –- probably in the form of full-scale quantitative easing –- to try to bring the euro down and re-ignite the recovery," said Capital Economics' chief European economist Jonathan Loynes
The German economy, which is also Europe's biggest, stalled in the second quarter (Q2), hit by weak exports and falling investment, casting a cloud over recovery in the crisis-battered eurozone region.
Germany's gross domestic product shrank by 0.2 percent in the period from April to June, following growth of 0.7 percent in the preceding three months.
Collapsing growth in the main eurozone economies pushed funds into the safety of German debt bonds on Thursday, causing the German borrowing rate to fall below 1.0 percent for the first time ever.
When trading began in New York, US stocks also posted gains, with the Dow Jones Industrial Average up by 0.14 percent to 16,674.61.
The broad-based S&P 500 gained 0.20 percent at 1,950.52, while the tech-rich Nasdaq Composite Index rose 0.16 percent to 4,441.11.
US markets were also encouraged by the latest jobless claims data, which pointed to an improving labour market.
- Euro higher -
In foreign exchange trading, the euro rose to $1.3396 from $1.3363 late on Wednesday in New York, as traders reacted to a forecast of higher eurozone inflation.
The European single currency climbed to 80.27 pence from 80.06 pence on Wednesday, while the pound edged up to $1.6694 from $1.6690.
On the London Bullion Market, the price of gold rose to $1,315 an ounce from $1,312 on Wednesday.
The European Central Bank on Thursday said that eurozone inflation has "more or less" reached a trough and will start moving higher again in the next few years.
Low and weak inflation is a concern because it carries the risk of outright falling prices, known as deflation, which deters consumers from spending in the belief they can wait and buy more cheaply later.
Despite the euro's gains on Thursday, the single currency "continues to gradually weaken in the near-term, undermined by the deteriorating outlook for economic growth in the eurozone," said Lee Hardman, an analyst at the Bank of Tokyo-Mitsubishi.
"French and German GDP reports for Q2 have both disappointed expectations.... The weakness of economic growth in Q2 will reinforce investor concerns over the eurozone growth outlook at a time when rising geopolitical tensions have also increased downside risks to growth."
The British pound meanwhile steadied after sliding on Wednesday as the Bank of England hinted that markets may have to wait longer than they thought for a long-awaited hike to its main interest rate.
With the BoE set to sit tight as low wage inflation offsets strong British output and falling unemployment, "an interest rate rise in 2014 and perhaps even the first quarter of 2015 appears a distant hope at present," said Jameel Ahmad, chief market analyst at foreign exchange brokers FXTM.
Asian stock markets closed mixed on Thursday, with investors focused towards the end of the day on the disappointing eurozone growth data.