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Markets falter in run-up to EU summit

LONDON -- Markets faltered Thursday after a surprisingly big rise in weekly U.S. jobless claims and ahead of a meeting of European leaders.

Sentiment in markets has been buoyant this week so a modest retreat was unsurprising. Propping up markets this week has been a run of positive U.S. economic news, expectations that Spain would soon request a bailout as well as some easing of concerns over the pace of the Chinese economic slowdown.

Investors are turning their focus to Brussels, where European leaders are gathering for their latest summit. Though expectations have diminished in recent days that the 27-nation EU will agree on the terms of a banking union, investors are keen to hear updates on the economic fate of Spain, as well as Greece, which appears to be near to securing its next batch of bailout cash.

"There seems to be some cheer coming through from the expectation that the EU summit may deliver some meaningful direction on continuing to resolve the euro crisis so against this backdrop perhaps the upbeat mood is to be expected," said Mike McCudden, head of derivatives at Interactive Investor.

Market sentiment was dented, however, by a surprise 46,000 rise in U.S. jobless claims last week to a seasonally adjusted 388,000, the highest in four months and more than reversing the previous week's decline. Disappointing earnings from the BB&T bank, Philip Morris and Boston Scientific also dented optimism.

In Europe, the FTSE 100 index of leading British shares ended the day slightly, up 0.1 percent, at 5,917, while Germany's DAX rose 0.5 percent to 7,437. The CAC-40 in France was up 0.22 percent at 3,535.

In the U.S., the Dow Jones industrial average was up 0.08 percent at 13,500 while the broader S&P 500 index fell 0.2 percent to 1,457.

Other markets were also generally subdued, with the euro broadly unchanged at $1.3098.

Earlier, China was in focus after figures showed the world's No. 2 economy grew by 7.4 percent in the third quarter from the same period the year before. Though lower than the previous quarter's 7.6 growth, the decline was much gentler than previous quarters. Upbeat retail sales figures also helped ease concerns over the slowdown.

"With many still pinning hopes of a global economic recovery being driven by China, this news is certainly welcome," said Fawad Razaqzada, markets strategist at GFT Markets.

In mainland China, the Shanghai Composite Index gained 1.2 percent to 2,131.69, the highest close in more than a month. The Shenzhen Composite Index gained 1.7 percent to 878.64.

Elsewhere in Asia, Japan's Nikkei 225 index rose sharply, by 2 percent to close at 8,982.86 and Hong Kong's Hang Seng added 0.5 percent to 21,518.71.