European Shares Hold Modest Gains On China Economic Rebound

European shares rose Friday following resurgent growth from China but gains were limited by a series of disappointing economic headlines from Britain and France.

Mining stocks led the gains for Britain's FTSE 100, taking the benchmark 35.52 points, or 0.58 percent, higher to 6,168.79, the highest level in nearly five years by the time trading began on Wall Street. Weekly gains were limited to around 0.8 percent.

US stocks fell in the opening minutes of trading in New York after another active day for blue-chip corporate earnings. The Dow Jones Industrial Average slipped 5.38 points, or 0.04 percent, to 13,590.64 immediately after the opening bell while the broader S&P 500 gave back 0.79 points, or 0.05 percent, to trade at 1,480.15. The tech-heavy Nasdaq, meanwhile, was little changed at 3,126.69.

Two major earnings announcements kept investors busy Friday, led by fourth quarter earnings from General Electric that beat analysts' forecasts thanks to a record backlog of $210bn in group orders for the year-end.

GE reported operating earnings of $4.7bn, or $0.44 per share, the companysaid in statement published on its website, a 13 percent increase from the same period last year and marginally higher than the $0.43 forecast by analysts polled by Thomson Reuters. Revenue for the three month period ending in December was $39.3bn, the company said, a 4 percent annual gain. Full-year earnings per share were reported at $1.52, or $16.1bn, up 16 percent from 2011.

Morgan Stanley posted better than expected fourth quarter earnings as the bank continues to cut costs and slash jobs in its investment unit and focus on its global wealth management division.

Profits for the three months ending in December were $573m, or $02.8 per share, the bank said in a statement published on its website. Revenue for the period rose 36 percent from the same period last year to $7.5bn. The figures compare to a Thomson Reuters estimate of $0.27 per share and $7.02bn. Last year the bank recorded $222m loss over the fourth quarter. Morgan Stanley posted better than expected fourth quarter earnings as the bank continues to cut costs and slash jobs in its investment unit and focus on its global wealth management division.

Profits for the three months ending in December were $573m, or $02.8 per share, the bank said in a statement published on its website. Revenue for the period rose 36 percent from the same period last year to $7.5bn. The figures compare to a Thomson Reuters estimate of $0.27 per share and $7.02bn. Last year the bank recorded $222m loss over the fourth quarter.

UK investor sentiment was boosted by data from China, which showed the world's largest energy consumer rebounded in the fourth quarter, reversing seven straight quarters of slowdown, to end the year with a 7.8 percent advance. China ensured its position as the world's second-largest economy after the US with calculated GDP reaching 51.9 trillion yuan ($8.28tn/€6.18tn/£5.18tn) in 2012, however, the quarterly pace of 7.9 percent was the slowest in more than a decade.

The broader picture, however, continues to look bleak for Europe's second largest economy, where retail sales fell by 0.1 percent from a disappointing tally in November, the Office for National Statistics reported Friday. Excluding volatile petrol sales, the annual gain of 1.1 percent was the slowest since 1998 if figures from 2010 when severe snow covered much of Britain and kept shoppers home are removed.

"The situation is unlikely to improve much over the coming year," warned Scotiabank economist Alan Clarke. "Employment growth is already cooling off and the trajectory for inflation is upwards. Both mean that households will have less spare cash and this should hold back demand."

The pound fell to its lowest level in at least two months against the US dollar as investors bet the disappointing figures would compel the Bank of England to increase its £375bn programme of asset purchases - known as quantitative easing - to revive the country's growth prospects. On a trade-weighted basis, sterling hit a nine-month low of 82.0 against the dollar and the euro, according to BoE data.

Investors' views on sterling are "... the most bearish I can remember since December 2008," said World First Currency Exchange chief economist Jeremy Cook on the social networking site Twitter.

The region-wide FTSE Eurofirst 300 posted a modest 0.94 percent gain, taking the index to 1,166.48 and reflecting investors' concern over the recovery prospects for the European economy.

The Bank of Italy sharply revised its growth estimate for Europe's third largest economy Friday, forecasting a full 1 percent decline this year - nearly five times higher than its previous assumption from last summer - but better than the 2.1 percent contraction it measured for 2012 during the country's third recession in a decade.

France's Finance Minister, Pierre Moscovici, warned that his country would not be able to reverse its economic downturn unless the whole of the Eurozone was pulled out of its current malaise.

"We've got to find the right balance between reducing deficits and the capacity to sustain growth," he said during a visit with Ireland's Finance Minister, Michael Noonan in Dublin. "In France, we made the choice to reduce deficits and will stick to that clearly but then again we also need to reflect on ways to enhance growth."

Germany slashed its full-year growth forecast by more than half earlier this week as exports slow and trade takes its toll on the region's largest economy.

Exports will slow to a 2.8 percent pace this year, the Economy Ministry said in a statement published on its website Wednesday, against a 3.5 percent gain in imports that will likely trim around 0.1 percent from German GDP this year, which the Ministry estimates will grow by 0.4 percent - less than half the 1 percent expansion it had previously published.

Germany's Federal Statistic Office said Tuesday that Germany GDP shrank by 0.5 percent in the final three months of 2012 and 0.7 percent for the full year. Exports, the Office said, grew at 4.1 percent annual pace - compared to 7.8 percent in 2011.