FTSE tests 5,500 on strong German growth

European markets have started to move tentatively up following strong GDP numbers from Germany.

The latest figures on German growth show the country remains the powerhouse of the eurozone, and that it avoided a recession in the first quarter of 2012.

Britain’s FTSE 100 index added 0.49%, or 27 points, to 5,493 by 8.55am and the Mid-250 index took on 0.56%, or 60 points, to 10,874. See the FTSE’s performance and the index’s top risers and fallers.

However 10-year bunds continued to fall despite the rise in equity markets, showing that investors are still nervous about a Greek exit from the single currency zone, political unrest in Athens as well as instability in the Spanish and Italian financial systems.

While the German economy beat analysts' forecasts of 0.1% growth to expand 0.5% in the first quarter, overnight Moody’s downgraded more than a dozen of Rome's lenders, citing recession concerns and rising bad debts.

Shavaz Dhalla, financial trader at Spreadex, said: ‘Bears seem to be resisting any substantial gains as traders brace themselves for a possible double-dip recession as preliminary GDP figures from the eurozone are due later this morning.

‘However, any early gains in European trading could be extinguished later today as retail sales from the US are due.  Economists are expecting a slowdown in sales and the weakest advance in four months.’

European stock markets also rallied to recover lost ground: Germany’s DAX index rose 0.45% to 6,481, France's CAC 40 index was up 0.75% to 3,082, and the FTSEurofirst 300 index of top European shares ticked ahead 0.56% to 1,009.

Security company G4S (GFS.L) rose to the top of the FTSE 100 index, up 8.3p, or 3.1%, to 275p as revenues grew 7.5% in the first quarter of 2012. A further boost to growth is expected from the London Olympics this year.

Citywire Top Stock Afren (AFR.L) took on 3.3p, or 2.7%, to 124p as its first-quarter production met expectations by rising to over times higher than a year ago. The group reports that it is on track to produce 46,000 barrels of oil equivalent a day by the end of the year.