PAN PYLAS

The Associated Press

LONDON (AP) -World stock markets rose strongly Thursday after another batch of better than expected corporate earnings fueled another wave of buying followinga few days of largely flat trading.

In Europe, the FTSE 100 index of leading British shares ended up 84.08 points, or 1.9 percent, at 4,631.61, and just below its 2009 high. Germany's DAX rose 90.34 points, or 1.7 percent, to close at 5,360.66, its highest since last October, while the CAC-40 in France ended 69.87 points, or 2.1 percent, higher at 3,435.49, its best finish this year.

And on Wall Street, the Dow Jones industrial average was up 155.31 points, or 1.7 percent, at 9,226.03 around the New York time while the broader Standard&Poor's 500 index spiked 18.66 points, or 1.9 percent, to 993.81 ‚ just shy of the 1,000 level it hasn't breached since last November.

Corporate earnings Thursday generally echoed the theme that came out of the U.S. over the previous two to three weeks ‚ that businesses around the world have weathered the economic recession better than anticipated. It's that hope that the worst of the recession is over that fueled the stock market rally this month and has sent many of the world's major indexes up to their highest levels for this year.

"Increasingly it feels like the time is not right to worry about this strength running out of steam just yet," said David Jones, chief market strategist at IG Index.

The positive market reaction to the earnings started in Asia where Japanese carmakers Nissan Motor Co. and Honda Motor Co. jumped 11.1 percent and 8.2 percent respectively on stronger-than-expected earnings.

That carried on into Europe on a bumper results day.

British telecommunications company BT Group PLC and its French peer Alcatel-Lucent SA were heavily in demand after they unveiled better than expected second-quarter earnings. BT was the biggest riser on the FTSE, up over 12 percent, while Alcatel rose over 9 percent, making it the biggest riser on the CAC, just ahead of Cap Gemini SA, Europe's largest computer consultancy, which spiked more than 8 percent after indicating that activity was stabilizing.

Rolls-Royce PLC, the aircraft engine manufacturer, also saw its share price surge more than 9 percent after it said it was on track to meet full-year targets after posting a 9 percent increase in first-half pretax profit.

And in the U.S., electronics firm Motorola Inc. reported a profit even though it was expected to post a small loss, while and MasterCard Inc. posted earnings that topped expectations.

Steven Ricchiuto, chief economist at Mizuho Securites, said the number of upside surprises coming from S&P companies is running at its highest level since 2004. However, he cautioned that the outperformance has been largely predicated on cost-cutting as opposed to any increase in demand.

"Cost cutting alone can't continue to power earnings; eventually corporate spending will have to increase, powering wage and salary growth," he said.

It wasn't all good news on the earnings front though.

Anglo-Dutch publishing group Reed Elsevier PLC slumped more than 12 percent after surprisingly announcing that it was issuing just under 10 percent of share capital to pay down its $8.4 billion debt burden.

German chemical company BASF SE saw its share price slide 2 percent, making it the biggest faller on the in-demand DAX, after it warned of a significant drop in sales and earnings this year even after reporting a 74 percent slump in second-quarter net profit.

Earlier in Asia, Hong Kong's Hang Seng edged up 98.58, or 0.5 percent, to 20,234.08, while Japan's Nikkei 225 stock average rose 51.97, or 0.5 percent, to 10,165.21 as the region was buoyed by news that industrial production in Japan rose 2.4 percent in June from the month before. The fourth straight rise raised hopes that the world's second largest economy could soon be growing again as global trade picks up.

Elsewhere in Asia, Shanghai's benchmark added 1.7 percent to 3,321.56 after China's central bank promised to maintain a "relaxed monetary policy" and to use market tools rather than administrative controls to regulate credit growth. On Wednesday, Chinese stocks slid 5 percent as investors panicked that the monetary authorities were looking at reining in bank lending.

China and other developing markets have surged this year ‚ China and India are up nearly 80 percent and 60 percent, respectively ‚ on hopes they can help buoy the world economy at a time when Western countries are reeling from recession.

But much of their advance has been driven by liquidity brought on by easier monetary controls and government stimulus, something analysts worry can camouflage lingering problems in the economy.

Neil Mackinnon, chief economist at ECU Group, warned that there are "certainly bubble-type" elements to the behavior of the Chinese market and that poses challenges for policy-makers.

"Global investors will be monitoring this carefully….the Chinese equity market has tended to lead developments in global equity markets," he said.

Elsewhere in Asia, South Korea's Kospi gained 0.7 percent, Australia's index advanced 1.2 percent and Singapore's market was up 0.5 percent.

Oil prices rose in line with stocks after tumbling around 6 percent Wednesday on news of bigger than anticipated U.S. stock levels. Benchmark crude for September delivery was up $2.94 at $66.29 a barrel.

The dollar was up 0.7 percent at 95.67 yen while the euro rose 0.2 percent to $1.4066.

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.