People walk by an electronic stock board of a securities firm in Tokyo Monday. (AP Photo/Koji Sasahara)
PARIS (AP) — Signs that the U.S. economy is slowly rebounding drove American stocks higher Tuesday, but many other markets struggled to find direction amid indications that Europe is still in trouble.
U.S. factory orders rose 2.1 percent in May, according to data released Tuesday, a slightly higher increase than expected. A day earlier, the ISM manufacturing survey showed a small rebound in June thanks to new orders and higher production.
Signs that industrial production in the world's largest economy is improving are likely to comfort investors, but they will also paradoxically hope that the pace of recovery isn't too robust. As the U.S. economy improves, the Federal Reserve will start to reduce the monetary stimulus program that has buoyed markets.
Many investors fear the Fed will take its foot off the gas before the U.S. rebound really gets under way. Meanwhile, data from Europe showed Tuesday that it is still struggling.
Industrial producer prices fell 0.3 percent in May in the 17 European Union countries that use the euro, Eurostat reported. While that shows costs are falling, it also indicates manufacturing activity remains weak.
Meanwhile, Spain announced Tuesday that the number of people registered as unemployed dropped for a fourth consecutive month in June — but the country has a long way to go to bring its jobless rate down to normal levels. It currently stands at 27.2 percent. A separate report on Monday showed the unemployment rate in the eurozone was at 12.2 percent in May, its highest level ever.
"While the European economy appears to be starting to show flickers of recovery particularly in Spain and Italy where the manufacturing sector appears to be showing signs of coming off life support, the unemployment picture remains disturbingly high," said Michael Hewson, a market analyst at CMC Markets UK.
France's CAC-40 fell 0.7 percent to close at 3,742.57 while the DAX in Germany was off 1 percent to 7,904.66. The FTSE index of British shares dropped 0.2 percent at 6,296.29.
Wall Street, by contrast, was trading higher. The Dow Jones industrial average rose 0.4 percent to 15,034.51; the broader Standard & Poor's 500 index was up 0.5 percent at 1,623.15.
"It seems investors are now looking for a major catalyst to tempt buying to help offset the continued worry that central banks may cut back this year," said Lee Mumford, a financial sales trader with Spreadex.
Many Asian stocks rose earlier in the day. Tokyo's Nikkei 225, the region's heavyweight index, jumped 1.8 percent to 14,098.74. Australia's S&P/ASX 200 was up 2.6 percent at 4,834.00 after the country's central bank left interest rates unchanged and said the Australian dollar is likely to continue falling, easing pressure on exports.
In China, the Shanghai Composite Index reversed early losses to rise 0.6 percent to 2,006.56 after reports on Monday that Chinese manufacturing weakened in June amid a credit crunch. Hong Kong's Hang Seng fell 0.7 percent to 20,658.65, led by Chinese banks, which are facing central bank credit restrictions.
Amid tentative signs of economic recovery, benchmark oil for August delivery rose $1.05 to $99.04 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.43 to close at $97.99 a barrel on Monday.
The euro fell to $1.3020 from $1.3065 late Monday in New York.
Associated Press writer Kay Johnson in Bangkok contributed to this report.