European stocks edge higher ahead of US data

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LONDON — European stock markets rose modestly Tuesday in very light pre-Christmas trade ahead of an expected rebound on Wall Street ahead of key U.S. data, while Asian markets continued to fall in the wake of Toyota's second profits warning in just two months.

The FTSE 100 index of leading British shares was up 20.33 points, or 0.5 percent, at 4,269.49 despite news that the British economy contracted by a bigger than anticipated 0.6 percent in the July-September quarter from the previous three month period. The figure updates the original estimate of 0.5 percent.

Meanwhile, Germany's DAX was 21.95 points, or 0.5 percent, higher at 4,660.97 and the CAC-40 in France was up 5.71 points, or 0.2 percent, at 3,157.07.

"Given the time of year and the proximity of the holidays and the New Year, liquidity will remain as thin as a wafer-thin mint, with only those who have to trade likely to be prepared to dip their toes in the volatile waters that the market has become," said Stuart Bennett, an analyst at Calyon Credit Agricole.

Wall Street was poised for a solid opening Tuesday, having ended Monday down following the dismal news from Toyota and U.S. drugstore operator Walgreen Co. Some of those losses were expected to be recouped later as Dow futures rose 21, while S&P futures added 2.00.

Investors will be keeping a close eye on some key U.S. data.

First up will be third quarter gross domestic product data. Wall Street expects U.S. GDP to have fallen 0.5 percent in the third quarter, in line with previous estimates.

Later, the Commerce Department will report on last month's new home sales, while the National Association of Realtors will report on existing home sales. Economists forecast that both will show declines.

Analysts largely believe that investors have factored in very weak economic readings for the previous and current quarters, and instead are looking ahead to 2009 for any signs of improvement. But such signs have been difficult to find as major corporations release bleak outlooks for next year.

Earlier, Asian stock markets fell as an interest rate cut in China disappointed investors and Toyota Motor Corp.'s profit warning from Monday raised concerns about the scale of the global slump.

Investors were unimpressed by 0.27 percentage point cut on the benchmark one-year lending rate to 2.25 percent, its lowest level since February 2004. Many had expected a half-point cut, analysts said. It was the fifth cut in four months as Beijing rushes to revive economic growth.

South Korea's Kospi retreated 35.3 points, or 3 percent ,to 1,144.31, Singapore's benchmark lost 1.2 percent and Australia's key index fell 0.7 percent. Japan's market was closed for a national holiday.

In China, Hong Kong's Hang Seng Index dropped 2.8 percent to 14,220.79 while Shanghai's main index plummeted 4.6 percent to 1,897.22 as both markets came under pressure after Beijing lowered a key interest rate late Monday.

Japan's market was closed for a public holiday.

Oil prices edged higher with light, sweet crude for February delivery up 5 cents to $39.96 a barrel in electronic trading on the New York Mercantile Exchange.

In currencies, the dollar fell 0.3 percent to 89.98 yen while the euro was 0.4 percent higher at $1.3985.

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AP Business Writers Sara Lepro in New York and Jeremiah Marquez in Hong Kong contributed to this report.

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