By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets moved higher on
Wednesday, as investors welcomed second-quarter GDP data from the
euro zone that showed the region has emerged from a
six-quarter-long recession.
The Stoxx Europe 600 index rose 0.3% to close at 308.62, marking
a fifth straight day of gains.
Victoria Clarke, economist at Investec Securities, said the
upbeat euro-zone data had already largely been priced in,
explaining why the index failed to post a stronger gain.
"We've seen a wave of survey data coming though a bit more
positive lately, and yes the GDP was a bit better than expected,
but still in the range of what people had been looking at. So
that's why we're not seeing a big rally today," she said.
"It was a good headline for the press, but for the markets there
wasn't a whole not of new news," she added.
Posting the biggest gain in the pan-European index, Subsea 7 SA
rallied 8.5% after the oil-field-services firm reported a
smaller-than-expected loss in the second quarter.
Rentokil Initial PLC climbed 6.1% after the pest-control and
hygiene firm reported a 5.2% rise in first-half adjusted operating
profit.
On a more downbeat note, shares of RWE AG lost 4.5%, after the
German utility firm reported a 38% drop in first-half net
profit.
ThyssenKrupp AG fell 1.3%, after the German industrial
conglomerate posted a loss in the fiscal third quarter.
The end of Europe's recession
European markets started to move higher after data showed the
euro zone has emerged from an 18-month recession. The region's
gross domestic product rose 0.3% in the second quarter, ahead of
market expectations of a 0.1% to 0.2% expansion. The currency
bloc's GDP contracted by 0.3% in the first three months of the
year.
But even if the data paint a rosier picture of the area, it is
too early to talk of a sustainable recovery, analysts said. Read:
Euro-zone GDP: Time to pop the champagne?
Tom Rogers, senior economic adviser to the Ernst & Young
Eurozone Forecast, said "that even in those countries with the
sharpest rebounds the pace of recovery is unlikely to be sustained
in the second half of the year."
"Last weeks' retail sales data underlined the weakness of
household spending power even in the north; credit is still only
flowing to firms in certain countries, and demand from emerging
markets is slowing down," he said. "More needs to be done if the
apparent recovery of the past few months is to be more than simply
a bright spot in an otherwise difficult few years," he added.
Data showed the German economy grew 0.7% in the second quarter,
while the French economy expanded 0.5%, both numbers were ahead of
expectations.
Germany's DAX 30 index rose 0.3% to 8,438.12, while France's CAC
40 index rose 0.5% to 4,114.20.
Bank of England minutes
The U.K. was also in the spotlight on Wednesday, after minutes
from the August Bank of England meeting showed eight out of nine
Monetary Policy Committee members were in favor of adopting forward
guidance on policy.
The BOE announced last week that it would keep its key lending
rate at a record low of 0.5% until unemployment falls to a
threshold of 7%, subject to certain conditions related to inflation
and financial stability.
In that vein, data from the Office for National Statistics
released Wednesday showed the U.K's unemployment rate held steady
at 7.8% in June, broadly in line with expectations. Additionally,
the number of people claiming unemployment benefits dropped 29,200
in July, much better than expected by analysts.
Clarke from Investec explained that the markets interpreted the
minutes as hawkish because of the one dissenter, while the
better-than-expected claimant counts further added to the negative
mood.
"The big drop in the claimant counts suggest a bit more momentum
in the labor market and that possibly we'll reach the 7% threshold
more quickly," she said.
The U.K.'s FTSE 100 index closed 0.4% lower at 6,587.43.
Vodafone Group PLC (VOD) lost 1.2% in London. German cable
network operator Kabel Deutschland Holding AG said preliminary
discussions with the European Union on its takeover by Vodafone
have advanced and are constructive. Kabel Deutschland shares fell
0.5%.
Outside the major indexes, United Internet AG put on 4.6% after
the company said first-half sales jumped 10.3% to an all-time high
of 1.283 billion euros ($1.7 billion).
Swiss Life Holding AG jumped 5.3% after the insurer posted a 30%
rise in first-half profit.
Shares of Celesio AG dropped 1.1% after the German health-care
firm cut its earnings outlook for the year, citing continued
competition in Germany and negative currency effects.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires