* MSCI world equity index up 0.5 pct on day
* European stocks rally on surprisingly strong German Q2 GDP
* Euro hits day's high vs dollar, risk demand rises
By Naomi Tajitsu
LONDON, Aug 13 (Reuters) - European stocks rallied on Friday
and the euro climbed against the dollar and the yen as investors
cheered solid readings of economic growth in euro zone countries
and a stellar performance in Germany.
Data showing the German economy grew by 2.2 percent in the
second quarter -- dwarfing forecasts for a 1.3 percent rise to
post its biggest gain since unification -- suggested the broader
euro zone economy is improving despite weakness in some member
countries.
Separate figures showed French gross domestic product (GDP)
grew by 0.6 percent in the same period, slightly higher than
forecasts and adding to 0.2 percent growth in the previous
quarter, while Austrian GDP grew 0.9 percent. []
[] <ECON>
The FTSEurofirst 300 index <> rallied roughly 0.5
percent in early trade, while the euro <EUR=> hit the day's high
against the dollar after the data on the view the euro zone
economy was on a better footing than in the United States.
"The data shows that one can indeed build more confidence in
sustainable growth in Europe as opposed to the United States,
which in my view will extend the outperformance of European
markets over the U.S.," said Heino Ruland, strategist at Ruland
Research in Frankfurt.
Flash euro zone second quarter GDP is due out at 0900 GMT.
The surge in Germany's economy prompted the country's
economy minister on Friday to raise its growth outlook for the
entire year. In contrast, the Federal Reserve earlier this week
acknowledged the U.S. economy's recovery was slowing.
By 0759 GMT, the MSCI world equity index <.MIWD00000PUS> was
up roughly 0.5 percent, clawing back after it hit a three-week
low the previous day.
The euro <EUR=> climbed 0.4 percent on the day to $1.2880,
reversing a slide to $1.2779 on Thursday, its lowest since late
July. Gains in the euro helped to push the dollar down 0.4
percent versus a currency basket <.DXY>.
YEN INTERVENTION SPECULATION
Adam Cole, global head of currency strategy at RBC, said the
strong GDP data had sparked some demand for riskier assets,
which had tumbled earlier this week on U.S. and global growth
concerns.
S&P futures <SPv1> climbed 0.6 percent on the day, while
emerging stocks <.MSCIEF> rose 0.6 percent.
Higher risk demand stung bond prices, prodding German
government Bund futures <FGBLc1> down 18 ticks to 131.04.
Still, Cole warned that concerns about fiscal and banking
problems in countries on the euro zone periphery may weigh on
the shared European currency over the medium term.
"The peripherals are still weak, and how the euro trades
depends on whether the market focuses on the strong core or the
weak peripherals, and the risk is they will focus on the weak,"
he said.
Despite its broad weakness, the dollar <JPY=> was flat
against the yen at 85.96 yen.
The Japanese currency has retreated from a 15-year high of
84.72 per dollar hit earlier this week on speculation that
Japanese authorities may enter the market to stem its strength.
After talking down the yen this week, Japan's prime minister
and its central bank chief are expected to meet next week to
discuss the currency's recent rally against the dollar.
[]
Market players do not expect actual intervention unless the
dollar drops near its record low of 79.75 yen, or the trend
becomes more volatile.
(Additional reporting by Harpreet Bhal and Tamawa Desai;
Editing by Ruth Pitchford)
