RTTNews - The European markets rose for the second day on Thursday after a report showed that the Eurozone economy contracted slightly in the second quarter even as Germany and France emerged out of recession, giving positive signals of an early recovery in the single-currency area from a deep recession.

The markets also got a boost from the statement by the U.S. Federal Reserve, which said yesterday that the world's largest economy shows signs of leveling out. The Fed yesterday left its interest rates at historic lows once again and pledged to continue to use all available tools to prop up the ailing economy.

The flash estimate from the Luxembourg-based Eurostat showed that the euro area shrank 0.1% sequentially in the second quarter. This was much slower than the 2.5% decline seen in the first quarter and an expected 0.5% contraction.

The report showed that the German economy unexpectedly expanded 0.3% sequentially in the second quarter, which was the first growth since the first quarter of 2008. The French economy surprisingly grew 0.3% in the second quarter on higher government spending and global demand, ending four straight quarters of economic contraction.

The U.S. Commerce Department said retail sales fell 0.1% in July, followed by a 0.8% increase in the previous month. Economists had expected the figure to rise 0.8%. Excluding the auto sector, retail sales were down by 0.6%. Economists were looking for a 0.1% rise excluding autos.

The U.S. Labor Department said in its report that initial jobless claims edged up to 558,000 from the previous week's revised figured of 554,000. Economists had been expecting claims to slip to 545,000 from the 550,000 originally reported for the previous week.

Crude for September delivery rose $1.26 to $71.42 a barrel on the New York Mercantile Exchange, by the time the European markets closed, as the dollar weakened.

The FTSEurofirst 300 index of pan-European blue chips closed 0.69% higher at 948.58 points, while the narrower DJ Stoxx 50 index rose 0.54% to 2,347.13 points.

Around Europe, the U.K.'s FTSE 100 index climbed 0.82% to 4,755.46, while France's CAC 40 index rose 0.45% to 3,524.39 and Germany's DAX index surged up 0.95% to 5,401.11.

Mining stocks rallied after copper prices rose to the highest level since September. BHP Billiton, the world's biggest miner, rose 2.3%, while Rio Tinto, the third biggest, surged up 4.3% and copper miner Antofagasta climbed 4.9%.

Prudential, Britain's biggest insurer, jumped 10.7% after the company reported stronger-than-expected first-half profits and raised its interim dividend.

German Internet service provider United Internet surged up 13% after the company reported higher first-half profit and raised its profit outlook for 2009.

UBS, Switzerland's largest bank, rose 5.4% on speculation that the settlement of a long-running U.S. tax dispute will allow the bank to focus on becoming profitable again.

On the other hand, Anheuser-Busch InBev, the world's largest brewer, fell 6% despite reporting forecast-beating second quarter profit, as the company said the second half of the year would be significantly weaker.

Dutch insurer Aegon slipped 5.9% after the company reported its fourth straight quarterly loss and said it would sell up to ?1 billion in stock to partially repay aid it received from the Dutch state.

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