Bareksa.com - Asian stocks held stubbornly steady on Wednesday after China reported economic growth that was just ahead of market expectations, drawing a sigh of relief from investors rather than outright applause.

China's economy expanded by 2.0 percent in the second quarter from the previous quarter, taking annual growth to 7.5 percent. Retail sales and industrial output were either in line with forecasts or slightly higher.

The data confirmed the Asian giant had stabilised after a shaky start to the year but still left the global outlook cloudy, particularly given recent weakness in the euro zone.

"The GDP figure is in line with our expectation, but the underlying momentum and recovery is still at a fragile state, especially given the property market correction," said Chang Jian, an analyst at Barclays based in Hong Kong.

"The recovery is quite dependent on the government support."

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent while Japan's Nikkei eased 0.1 percent.

Markets in China managed only a muted cheer and the Shanghai index dipped 0.29 percent.

European investors seemed more impressed, with financial spreadbetters expecting the FTSE 100, DAX and CAC 40 to open 0.2 percent to 0.3 percent firmer.

Wall Street had provided scant direction after investors gave a muddled reaction to testimony from Federal Reserve Chair Janet Yellen.

Yellen reiterated that the U.S. labour market was far from healthy and signalled the Fed would keep monetary policy loose until hiring and wage data show the effects of the financial crisis are "completely gone".

Yet bond investors fixed on a comment that rates could rise more quickly should the labour market continue to improve at a rapid pace, and drove up short-term Treasury yields.

The latest U.S. economic news was generally upbeat as a solid rise in core retail sales in June combining with upward revisions to past months led analysts to nudge up estimates for economic growth in the second quarter.

The Dow ended up a bare 0.03 percent, while the S&P 500 lost 0.19 percent and the Nasdaq 0.54 percent. High-flying social media and biotechnology shares took a hit after the Fed singled out the valuation of the sector as "substantially stretched."

But there was some brighter news for the tech sector as chipmaker Intel jumped more than 4 percent after beating estimates.

EURO BLUES

JPMorgan Chase & Co and Goldman Sachs outperformed after reporting strong results. JPMorgan finished up 3.5 percent and was the biggest gainer on the Dow.

The contrast to Europe was stark as banking shares were sideswiped when Portugal's Banco Espirito Santo slumped 17.5 percent to a fresh record low.

The euro took collateral damage and fell to its lowest in a month at $1.3555.

The single currency also took a mauling from the pound, which jumped when UK inflation surprised with a high reading, stoking speculation for interest rates to rise this year.

Attention now is on UK unemployment figures due later Wednesday where a strong report could lift the pound further.

The euro sank to a two-year trough at 79.08 pence, while sterling made a six-year peak on the dollar at $1.7191 . The U.S. currency still managed to gain elsewhere and its index edged up to a three-week high at 80.453.

A big mover in Asia was the New Zealand dollar, which slid to $0.8700 after the country reported softer-than-expected inflation.

In commodity markets, gold fell back to $1,298.50 an ounce and further away from last week's peak at $1,345.

Oil prices managed a small bounce on Wednesday having struck a three-month trough the day before. Prices have been falling for three weeks now as traders shift their focus from violence in Iraq and Libya to weak global fundamentals.

Brent futures edged up 8 cents to $106.10 a barrel, having shed over a dollar on Tuesday. U.S. crude futures recouped 46 cents to stand at $100.42 a barrel. (Source : Reuters)