European stock markets rose robustly on Friday as official data showed eurozone growth holding up in the face of soaring inflation.
Stock markets in Asia ended the session lower after data showed that the US economy contracted again, reinforcing recession fears, but boosting expectations that the US Federal Reserve will slow its pace of interest rate hikes.
After an extended period of pessimism on trading floors, investors were beginning to speculate that the market may be bottoming out.
The EU's official data agency said the 19-country eurozone grew by 0.7 per cent in the second quarter, even though inflation rose to a new record of 8.9 per cent in July.
A day earlier, US data showed the world's biggest economy shrank by 0.9 per cent in the period from April to June after already contracting by 1.6 per cent in the preceding three months.
But the reading was taken as a sign of good news, since it could give the Fed room to take its foot off the pedal and treasury yields – considered a barometer of future interest rates – eased.
Officials were expected to continue raising US interest rates, but analysts estimate they would announce a half-point rise in September, compared with three-quarters of percentage point at the past two meetings.
"Stocks continued their rally in Europe on Friday, alongside US futures, as market sentiment improved following reassuring macro data in addition to positive corporate results," said ActivTrades analyst Pierre Veyret.
The prospect of US interest rates not rising as fast as previously expected has knocked the dollar slightly after soaring against other major currencies in recent months.
A second successive contraction in growth is widely considered a technical recession, although it is not officially considered so in the United States until identified as such by the National Bureau of Economic Research.
But while debate rages over that issue, the consensus is that the economy is struggling.
"The more important point is that the economy has quickly lost steam in the face of four-decade high inflation, rapidly rising borrowing costs, and a general tightening in financial conditions," said Sal Guatieri, of BMO Capital Markets.
The more important point is that the economy has quickly lost steam in the face of four-decade high inflation, rapidly rising borrowing costs, and a general tightening in financial conditions- Sal Guatieri, of BMO Capital Markets
China is also struggling, hit by COVID-induced lockdowns in major cities including Shanghai and Beijing that have hammered all sectors and supply chains.