European stocks firm despite mounting global economic woes

European stock markets edged higher on Wednesday after recent heavy losses as investors paused for breath despite a fresh stream of bad news on the state of the world economy, dealers said. London's benchmark FTSE 100 index added 0.24 percent to 5,512.68 points in midday trade but was off earlier highs following dire news that Britain's recession deepened in the second quarter of 2012. British gross domestic product slumped by a worse-than-expected 0.7 percent in the three months to June, according to official data published just ahead of the London Olympics. Elsewhere, the Paris CAC 40 gained 0.55 percent to 3,091.55 points and Frankfurt's DAX 30 rose 0.43 percent to 6,417.78 as investors set aside news of sliding German investor confidence. Italian and Spanish markets rebounded sharply, clawing back some of their recent losses suffered on eurozone debt crisis concerns. Milan jumped 1.46 percent and Madrid rallied 1.75 percent. In foreign exchange deals, the euro climbed to $1.2141 from $1.2063 in New York late Tuesday, when it had tumbled to a two-year low at $1.2043. "The lack of movement on the FTSE ... with the index barely in positive territory, belies the growing storm clouds threatening financial markets," said analyst Chris Beauchamp at trading group IG Index. European equities fell in choppy trade on Tuesday on persistent eurozone tensions with Spanish borrowing costs still at danger levels, sparking fresh talk of a full bailout. "The list of woes for the global economy seems to get longer by the day, meaning that optimists are struggling to find any reason to stay upbeat," said Beauchamp. "The steady deterioration in Spain's financial position continues as bond yields climb ever higher. "Any debate about a bailout for Spain inevitably ends with a mention of Italy as the next domino but there still isn't enough money in the pot to rescue both of them. "As if that wasn't bad enough, tech giant Apple failed to match its usual form, announcing a rare earnings miss (overnight) ... that provoked a brief flurry of panic among investors. "Finally, UK GDP data provided a particularly nasty surprise this morning," Beauchamp added. Asian stock markets closed lower on Wednesday as investors played catch-up with Tuesday's European and US performance amid growing fears Spain would need a full bailout. Japanese shares were also hurt by news the country had posted a record trade deficit in the first six months of the year as energy costs soared and exports to key markets tumbled while the strong yen also weighed. Tokyo closed down 1.44 percent, Seoul fell 1.37 percent and Sydney lost 0.23 percent. Hong Kong retreated 0.14 percent and Shanghai dipped 0.49 percent as tech stocks were hit by Apple's results. All eyes remain firmly on Europe, where Madrid remains in focus as its borrowing costs for benchmark 10-year bonds reached 7.621 percent on Tuesday, well into the danger zone for long-term funds. The figure is around the levels that forced Greece, Ireland and Portugal to seek bailouts. For Germany, the Ifo economic institute said Wednesday that business confidence dropped for the third month in a row in July as companies grew increasingly pessimistic about the fallout from the eurozone debt turmoil. The closely-watched Ifo business climate index dropped to 103.3 points in July from 105.2 points in June, a slightly steeper decline than expectations. Across the Atlantic, Wall Street fell sharply Tuesday on growing concerns about Europe's debt crisis, soft corporate earnings at home and a weak manufacturing report. The Dow Jones Industrial Average closed with triple-digit losses for the third straight day, down 104.14 points or 0.82 percent at 12,617.32 points. After the closing bell, Apple announced that quarterly profit rose 20.5 percent to $8.8 billion on hot iPad sales but that was slightly shy of forecasts. The firm blamed the outcome on customers putting off buying the iPhone ahead of the expected release of the updated iPhone 5 model later in the year.