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Markets subdued despite upbeat Japanese growth

LONDON Financial markets were subdued Thursday despite encouraging growth figures out of Japan, as investors paused for breath a day after the main U.S. stock indexes struck record highs.

Stocks have been buoyant for most of this year amid hopes over the U.S. economy, an easing of concerns over Europe's debt crisis and an expectation that central banks will continue with their super-easy monetary policies for a while longer.

"This rally is not dead, it's just resting," said Alastair McCaig, market analyst at IG.

In Europe, Germany's DAX was down 0.2 percent at 8,343 while the CAC-40 in France fell 0.4 percent to 3,968. The FTSE 100 of leading British shares was flat at 6,695.

Wall Street was poised for a modestly lower opening, with Dow futures and the broader S&P 500 futures down 0.1 percent.

The main point of interest later will likely be weekly jobless claims -- investors will be keen to see if the recent run of improvement in U.S. jobs figures continues. A manufacturing survey from the Philadelphia Fed will also be monitored in light of a weak equivalent report from the New York Fed on Wednesday.

Japan was in focus earlier after figures fueled hopes of an economic turnaround in the country. A day after the latest set of data showed that the eurozone -- the 17 European Union countries that use the euro -- was in its longest recession since the currency was launched in 1999, Japanese data impressed on the upside.

Stronger consumer spending and public works investment coupled with aggressive monetary easing gave some oomph to the recovery. Japan's economy grew by a stronger-than-expected 3.5 percent in annual terms and by 0.9 percent on a quarterly basis, according to figures reported by the Cabinet Office on Thursday.

The forecast-busting data provides the first tangible evidence that the economic policy of the new government of Prime Minister Shinzo Abe is working.

Abe promised aggressive steps to restart the country's postwar boom, which effectively ground to a halt in the early 1990s. As part of that effort, the Bank of Japan plans to double the amount of cash circulating in the Japanese economy and held as bank reserves.

One of the offshoots of the policies has been a dramatic fall in the value of the yen, and that's boosted the export prospects of the country's businesses and lain behind the Nikkei's 40 percent rise this year. The dollar was up a further 0.4 percent at 102.55 yen.

The Nikkei didn't extend those gains Thursday, losing 0.4 percent to close at 15,037.24 as investors used the release as an opportunity to book some gains.

"If you're looking for a clear example of the markets currently moving in a way that is unrelated to the quality of the data, then look no further than the movement in the Nikkei," said Craig Erlam, market analyst at Alpari.

Despite the modest retreat in Tokyo, most other Asian markets advanced. Hong Kong's Hang Seng rose 0.2 percent to 23,082.68. while South Korea's Kospi added 0.8 percent to 1,986.81. China's main index in Shanghai ended 1.2 percent higher at 2,356.80.

Oil prices were soft, with the benchmark New York rate down 75 cents to $93.55 per barrel.