LONDON (AP) — European stock markets recouped early losses and closed higher Thursday, while Wall Street rallied after weekly U.S. jobless claims data stoked hopes that fewer people are losing their jobs in the world's largest economy.
More optimistic economic assessments from the European Central Bank and the Bank of England also helped Europe's markets recoup earlier losses.
In Europe, the FTSE 100 index of leading closed up 17.75 points, or 0.4 percent, at 5,125.64 while Germany's DAX rose 36.69 points, or 0.7 percent, to 5,480.92. The CAC-40 in France was up 38.40 points, or 1.1 percent, at 3,708.73.
And on Wall Street, the Dow Jones industrial average was up 171.85 points, or 1.8 percent, at 9,973.99 around midday New York time while the broader Standard & Poor's 500 index spiked 16.12 points, or 1.5 percent, to 1,062.62.
Thursday's advance came after the Labor Department said first-time claims for jobless benefits fell 20,000 to a seasonally adjusted 512,000. Economists had expected 523,000 new claims.
The jobless claims figures came as attention in the markets was turning towards Friday's U.S. nonfarm payrolls report for October. The jobs data often set the stock market tone for a week or two.
At the moment, analysts expect payrolls to have fallen by around 175,000 during the month, while the unemployment rate is expected to tick up further to, or just below, 10 percent.
Neil Mackinnon, global macro strategist at VTB Capital in London, even raised the prospect that payrolls may actually increase, which could trigger talk of an earlier-than-expected withdrawal of liquidity by the U.S. Federal Reserve and possibly even raise the specter of imminent increases in borrowing costs.
"This is a market-risk worth noting and could leave equity markets in a very precarious position as it could signal less liquidity going forward," said Mackinnon.
Much of the global stock market rally since March has been fueled by liquidity measures from the central banks.
On Wednesday, the Fed indicated it would keep its benchmark interest rate at near zero percent "for an extended period" even though it conceded that economic activity had picked up. However, it laid out the conditions that would signal a rate increase, such as a pick-up in inflation or an upside surprise on growth.
Most economists think that the European Central Bank could well be the first out of the blocks in reversing the easy money policies put in place to prevent the global recession from becoming a depression.
ECB president Jean-Claude Trichet told the press after the central bank kept its main interest rate unchanged at the historic low of 1 percent that he would provide markets an update on liquidity measures next months.
He hinted at a gradual phasing out of the measures the central bank has undertaken over the last couple of years and that next month's one-year credit offering to banks could end up being the last.
"The latest comments from the ECB suggest that it is edging slowly towards the policy stimulus exit," said Jonathan Loynes, chief European economist at Capital Economics.
One central bank still quite a way from pronouncing on an exit strategy is the Bank of England, which earlier said it will pour another 25 billion pounds ($41 billion) into the British economy to help it out of recession as it kept its main interest rate at a record low of 0.5 percent.
The bank decided to expand its asset purchase program to 200 billion pounds from 175 billion pounds. The purchases, which are expected to take three months to complete, aim to increase the amount of money in the economy and are financed by the issuance of central bank reserves.
The scale of the expansion was smaller than most predictions — many analysts were expecting a 50 billion pound increase.
As a result, the markets took the relatively small increase as evidence that the Bank of England thinks that a recovery in Britain is in the offing.
Many analysts think that the markets are at a crucial juncture and that stocks, which have rallied for most of the year, could be facing a year-end slide. Over the last couple of months, most of the dips have proved to be short-lived.
However, the markets have been very volatile over the last couple of weeks, with many traders wondering whether current stock valuations are justified by the wider economic fundamentals, especially if the global economic recovery peters out as pent-up demand and restocking fizzle out.
Earlier, Japanese shares helped lead Asian stocks lower, with the Nikkei 225 stock average falling 126.87 points, or 1.3 percent, to 9,717.44.
South Korea's market pulled back 1.8 percent to 1,552.24, while Hong Kong's Hang Seng was down 0.6 percent at 21,479.08. Markets in Indonesia, Singapore and Australia also slid but Chinese shares bucked the downward trend to gain modestly.
Benchmark crude for December delivery was down 40 cents at $80 a barrel.
The dollar slipped 0.3 percent to 90.50 yen while the euro was unchanged around $1.4875.
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Associated Press Writer Alex Kennedy in Singapore contributed to this report.
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