US growth figures have minimal market impact

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LONDON (AP) — Markets mostly held their ground Friday after figures showed that the U.S. economy grew less than expected at the end of 2010, as investors saw that the lower growth number came from a one-time slowdown in businesses building up their inventories.

The Commerce Department reported that the U.S. economy grew by an annualized rate of 3.2 percent in the fourth quarter. That was up on the previous quarter’s 2.6 percent rate but below market expectations for a 3.5 percent increase.

Analysts said the shortfall from expectations was due to a big swing in inventory buildup from $121 billion in the third quarter to just $7.2 billion in the fourth.

Other components in the growth figures were relatively buoyant, particularly consumption growth.

"The U.S. economy bounced back in Q4, and that’s good news no matter how you slice it," said Jennifer Lee, senior economist at BMP Capital Markets. "It’s not a boom time but it is becoming more self-sustaining."

The fourth quarter figures also confirmed that the U.S. economy enjoyed its best year in five in 2010, growing by 2.9 percent.

And the U.S. is also widely expected to be one of the fastest-growing major economies in 2011 given ongoing stimulus measures, which stand in contrast to the austerity measures being pursued elsewhere around the world, notably in Britain and in a number of countries that use the euro.

In early trading, the Dow Jones industrial average was up around 8 points at just below 12,000 while the broader Standard & Poor’s 500 futures rose around a point to 1,300.

In the currency markets, the dollar fell slightly in the wake of the figures but still remained higher against the euro on the day.

Europe’s single currency, which has been buoyant of late on hopes that Europe is finally getting a handle on its debt crisis, was trading 0.2 percent lower at $1.37.

In Europe, Germany’s DAX rose 0.1 percent to 7,165 while the CAC-40 in France was 0.1 percent higher at 4,062.48.

The FTSE 100 index of leading British shares underperformed its peers, trading 0.8 percent lower at 5,916 following news that consumer confidence has slumped. The survey from GfK NOP stoked renewed fears that the British economy may fall back into recession after figures earlier this week showed an unexpected 0.5 percent drop in output in the last three months of 2010. A recession is officially classified as two consecutive quarters of negative growth.

Earlier, markets in Asia were rattled by the previous day’s credit rating downgrade of Japan by Standard & Poor’s. The rating given Japan on Thursday — its first downgrade in almost nine years — is the same rating given to China, Saudi Arabia and Kuwait. The news sent the dollar as high as 83.18 yen late Thursday from 82.20 yen. On Friday it was trading at 82.63.

Japan’s benchmark Nikkei 225 stock average dropped 1.1 percent to close at 10,360.34 as traders reacted to the downgrade for the first time — markets had closed when S&P delivered its verdict. The dollar gave up its previous day’s gains though, trading 0.6 percent lower at 82.34 yen.

Elsewhere, Australia’s S&P/ASX 200 closed down 0.7 percent at 4,774.90 as the first estimates of the economic cost of east coast flooding — possibly the most expensive natural disaster in Australia’s history — were released.

South Korea’s Kospi declined 0.3 percent to 2,107.87 and Hong Kong’s Hang Seng fell 0.7 percent to 23,617.02. Shares in Indonesia and Thailand were all lower.

China’s Shanghai Composite index gained 0.1 percent to 2,752.75. Benchmarks in Taiwan and New Zealand were also higher.

Benchmark crude for March delivery was down 47 cents at $86.11 a barrel in electronic trading on the New York Mercantile Exchange.

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Carlo Piovano in London and Pamela Sampson in Bangkok contributed to this report.

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