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European, US markets rise after unexpected surge in demand for cars, planes
BRUSSELS (AP) ' Stocks in Europe and the U.S. rose Wednesday after data showing a surge in demand for cars and planes in July offered an unexpectedly upbeat sign of life in the U.S. economy.
Investors on both sides of the Atlantic shrugged off a cut in Japan's credit rating that had weighed on Asian markets earlier in the day.
But stocks are likely to fluctuate ahead of Friday's speech by Federal Reserve Chairman Ben Bernanke at an economics conference in Jackson Hole, Wyo. Investors hope Bernanke will signal a third round of massive bond-buying to boost the faltering U.S. recovery.
Britain's FTSE 100 rose 1 percent to 5,181 points. Germany's DAX jumped 2.5 percent to 5,672 and France's CAC-40 rose 1.6 percent to 3,134.
After initially opening lower, Wall Street also turned higher after the Commerce Department reported an unexpected 4 percent surge in demand for long-lasting manufactured goods in July. Demand for autos and auto parts jumped 11.5 percent, the most in eight years. Aircraft orders, a volatile category, soared 43.4 percent, after falling 24 percent in June.
The data is encouraging because it shows resilient demand for goods that require big, long-term investments.
In morning trading, the Dow Jones Industrial Average rose 0.9 percent to 11,279, while the broader S&P 500 slipped 0.3 percent to 1,159.
The report from the Commerce department "reinforces other data that the economy wasn't at serious risk of recession through July," said David Resler, chief U.S. economist at Nomura Securities. Retail sales and industrial production also held up well last month, he said.
The positive report also boosted oil prices, as a growing economy has more demand for energy.
But analysts have warned that any long-term stabilization in global stock markets will likely only come once there is a better plan to get the U.S. economy to grow faster and create more jobs as well as a lasting solution to the eurozone's debt crisis.
"If Bernanke does not pull a rabbit out of the hat at Jackson Hole on Friday risk trades could look vulnerable once again," analysts at Credit Agricole cautioned.
Fresh data out of the eurozone indicated that some businesses are already preparing for potential troubles.
Germany's closely watched Ifo index of business optimism fell more than expected in another negative signal about Europe's largest economy. The index fell to 108.7 for August from 112.9 in July. Market analysts had expected a smaller drop to 111.0.
"August's drop in Ifo business confidence adds to the growing evidence that the German economic recovery has faltered," analysts at Capital Economics wrote in a note, adding that a slowdown for the eurozone's growth engine is set to hurt other members of the currency union that are still fighting to pull themselves out of crisis.
The European Union's statistics office, meanwhile, said that industrial new orders in the currency union dropped 0.7 percent in June from the previous month. In May, industrial orders had grown 3.6 percent.
Earlier in Asia, Japan's Nikkei 225 index fell 1.1 percent to close at 8,639.61 after opening higher early Wednesday.
Sentiment was dented after Moody's Investors Service downgraded Japan's credit rating to Aa3 from Aa2, citing weak growth prospects for the world's No. 3 economy, massive government debt and constant political uncertainty. The new rating is three notches below Moody's top Aaa rating.
The downgrade, which puts Moody's rating in line with other major credit rating agencies, is the latest blow for Japan after its economy remained mired in recession in the second quarter due to tumbling factory production and exports following the March 11 earthquake and tsunami.
South Korea's Kospi dropped 1.2 percent, Hong Kong's Hang Seng tumbled 2.1 percent and Australia's S&P/ASX 200 fell 0.1 percent. Markets in Singapore, Taiwan and Indonesia also fell.
Mainland Chinese shares were mixed with the benchmark Shanghai Composite Index falling 0.5 percent to 2,541.09 while the Shenzhen Composite Index edged 0.1 percent higher to 1,144.74.
In commodities markets, benchmark oil for October delivery rose 44 cents to $85.88 a barrel on the New York Mercantile Exchange. In London, Brent crude for October delivery jumped 84 cents to $110.15 on the ICE Futures exchange.
The euro gained 0.3 percent to $1.447, while the dollar fell 0.2 percent to 76.51 yen.
Pamela Sampson in Bangkok and Christopher S. Rugaber in Washington contributed to this story.