World markets edge higher as Euro zone holds rates

LONDON -- World stock markets rose modestly Thursday after the European Central Bank held interest rates even and software company SAP AG reported upbeat fourth quarter earnings.

In Europe, the FTSE 100 index of leading British shares was up 33.88 points, or 0.6 percent, at 5,507.36 while Germany's DAX rose 33.15 points, or 0.6 percent, to 5,996.29. The CAC-40 in France was 10.57 points, or 0.3 percent, higher at 4,011.43.

Wall Street stocks rose a tad despite an unexpected decline in U.S. retail sales in December -- the Dow Jones industrial average was 29.55 points, or 0.3 percent, higher at 10,710.32 soon after the open while the broader Standard & Poor's 500 index rose 3.06 points, or 0.3 percent, to 1,148.74.

Sentiment has been upbeat since a U.S. Federal Reserve report late Wednesday painted a more positive assessment of the U.S economic recovery. That helped the Dow Jones industrial average close at a 15-month high.

The central bank left rates unchanged, as expected, at a historic low of 1 percent and indicated that there wouldn't be any increase any time soon.

European Central Bank President Jean-Claude Trichet also slammed suggestions that Greece, or any other country, could be kicked out of the euro given mounting budgetary problems.

A scathing report Tuesday by the European Commission on the unreliability of Greece's budgetary data reignited speculation that Greece may need to be bailed out by its partners in the European Union or even be compelled to leave the single currency bloc.

Investors looked past some relatively weak U.S. jobs data -- showing new claims for unemployment insurance rose by 11,000 last week and the 0.3 percent decline in December retail sales -- to focus on earnings.

Markets are keen to see if the increasing optimism on Wall Street, which has driven a ten-month bull run in stock markets, is justified by the fundamentals.

Germany's SAP said in a preliminary report that its fourth quarter revenue was Ȣ‚ˆ¬3.18 billion, down 9 percent from a year earlier but still better than it expected. It did not provide a profit figure, but said its operating margin was 32.8 percent.

That raised spirits ahead of another key earnings statement Thursday by Intel, which will reveal its results in an after-hours statement.

Earlier this week, aluminum company Alcoa Inc. saw its share price tumble 11 percent after it reported lower than expected earnings for the fourth quarter.

"After Alcoa's weaker numbers on Monday many will be nervous ahead of this release as any weaker numbers could dent confidence further as fears are already growing that we could see a disappointing earnings season," said James Hughes, market analyst at CMC Markets.

Earlier in Asia, stocks rallied amid receding worries about credit-tightening in China and Australia's economic recovery showed new momentum.

Economists say China is likely to confine tightening to technical tinkering to discourage excess lending and will likely wait some time before raising benchmark interest rates or cutting back on the government stimulus spending credited with helping revive domestic demand and creating jobs.

"Investors realized they were overreacting and tended to think the hike is necessary for the good of Chinese economy amid inflation expectations," said Zhang Xiang, an analyst for Guodu Securities in Beijing.

Japan's Nikkei 225 stock average led Asia's gains, jumping 172.65, or 1.6 percent, to 10,907.68. That was despite news that core machinery orders -- a closely watched indicator of corporate capital spending -- slumped to a record low in November as anemic domestic demand kept companies cautious.

South Korea's Kospi added 0.9 percent to 1,685.77. Australia's market rose 0.6 percent after new figures showed that the unemployment rate unexpectedly fell to 5.5 percent in December and thousands of new jobs were created.

Singapore's benchmark was up 0.7 percent but Hong Kong's Hang Seng gave up early gains to close down 31.65, or 0.2 percent, at 21,716.95. China's Shanghai index rose 42.89 points, or 1.4 percent, to finish at 3,215.55.

Oil prices climbed back towards $80 a barrel as rising stock markets ahead of fourth quarter earnings cheered crude traders. Benchmark crude for February delivery was up 19 cents to $79.84 in electronic trading on the New York Mercantile Exchange; the contract gave up $1.14 to settle at $79.65 on Wednesday.

The dollar was steady around 91.30 yen while the euro was down modestly at $1.4480.