LONDON (AP) -- News of a rebound in China's economy shored up markets on Friday at the end of a volatile week that saw the U.S. veer dangerously close to defaulting on some of its debts.
Now that the U.S. Congress agreed to raise the country's borrowing limit, eliminating for now the risk of default, investors were able to focus on something other than the squabbling in Washington a day after the S&P 500 index closed at a record high.
"The sentiment in the market today is one of mild relief and back to business as usual," said David White, a trader at Spreadex.
China's economic rebound in the third quarter was the main driver of sentiment on Friday. Government figures showed that the world's number 2 economy grew by an annual rate of 7.8 percent in the third quarter, up from a two-decade low of 7.5 percent during the previous three-month period.
The improvement eased fears of a deeper Chinese slowdown that could crimp the world economy and should ensure that full-year growth doesn't fall below Beijing's 7.5 percent target.
Corporate earnings were also on the radar of most traders -- the start of the quarterly results season had taken a backseat to the developments in Washington. On Friday, solid earnings from General Electric and Morgan Stanley helped shore up the market mood.
In Europe, the FTSE 100 index of leading British shares was up 0.5 percent at 6,611 while Germany's DAX rose 0.3 percent to 8,839. The CAC-40 in France was 0.9 percent higher at 4,276.
In the U.S., the Dow Jones industrial average was steady at 15,374 while the broader S&P 500 index rose 0.4 percent to 1,740. On Thursday, the S&P day closed at a record high of 1,733.15 after investors breathed a sigh of relief that the U.S. government cobbled together a deal to avoid a potential default.
Lawmakers reached an eleventh-hour agreement late Wednesday evening to raise the $16.7 trillion debt limit. Still, investors are assessing the long-term cost of the drawn-out political battle and the likelihood of another high-stakes standoff early next year, when the short-term increase to the U.S. debt ceiling runs out.
Earlier in Asia, Hong Kong's Hang Seng closed up 1.1 percent at 23,340.10 and China's Shanghai Composite Index added 0.4 percent to 2,193.78. Australia's S&P/ASX 200 rose 0.7 percent to 5,321.50. Japan's Nikkei 225 bucked the trend, dropping 0.2 percent to 14,561.54. Markets in India and Southeast Asia rose.
The U.S.'s economic reputation and the status of the dollar as the world's reserve currency have taken a hit from the standoff. As a result, the dollar suffered a broad-based drop Friday.
The euro was up 0.1 percent at $1.3680, just shy of its earlier 8-1/2 month high of $1.3704. The dollar was 0.2 percent lower at 97.79 yen.
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