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Europe: Shares shrug off Brexit gloom

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[LONDON] European shares appeared on Friday to shrug off gloomy data showing Britain's economy was battered by the Brexit vote which fanned investors' hopes of more central bank stimulus, analysts said.

London's benchmark FTSE 100 index closed 0.5 per cent higher, Paris' CAC 40 was a cautious 0.1 per cent up, while the DAX in Frankfurt dipped just into the red, at 0.1 per cent lower.

Wrapping up a week which saw Britain's new Prime Minister Theresa May tour France and Germany to soothe Brexit jitters, a key survey offered a grim reading for the British economy.

British business activity sank in July to its lowest level since April 2009, the survey said in a "dramatic deterioration" in the economy following the shock EU exit vote last month.

The PMI survey by research Markit group sank to 47.7 points this month, down from 52.4 in June. A reading under 50 indicates shrinkage.

Capital Daily's John Higgins said the plunge "was shrugged off in the markets".

"Admittedly, sterling fell back below $1.31/£. But the currency's decline simply gave the multinational-heavy FTSE 100 a shot in the arm," he said in a note to investors.

Spreadex analyst Connor Campbell said the divergence between the pound and the FTSE suggested the data had "added fuel to the rate cut fire".

"Following the rather big hint towards some kind of stimulus in August contained in the Bank of England's July statement the first real glimpse of post-Brexit data seems to suggest that the central bank may be forced to act whether it wants to or not," he told AFP.

Meanwhile, economic activity in the eurozone fell in July but only slightly, in a signal that the bad effects of Brexit have yet to take hold in continental Europe, Markit said.

The data was published a day after the European Central Bank held interest rates.

"European markets have finished the week on a disappointing note though they have managed to close the week higher for the second week in succession," CMC Markets UK analyst Michael Hewson said in a note to investors.

"While flash PMI data for France and Germany for July was slightly better than expected it was still down on the previous months readings."

Wall Street failed to offer Europe any momentum after opening, with investors cautious after the Dow lost ground Thursday to end a six-day streak of records amid a mix of earnings reports.

Boeing shares took a hit after the company announced that it would take a US$2.1 billion charge against second-quarter earnings.

Equity markets fell in Asia, tracking the Dow on Wall Street's first loss in six sessions, with sentiment hit as the Bank of Japan (BoJ)- in contrast - talked down speculation of fresh stimulus.

The BBC aired a month-old interview with BoJ governor Haruhiko Kuroda in which he said there was "no need and no possibility" for so-called helicopter money to be part of any stimulus package.

The strategy of helicopter money sees the bank funnel cash directly into the economy, such as putting cash straight into people's bank accounts, rather than the more traditional bond-buying method.