Japan's economy outpaces predictions

Global markets showed improvement, as optimism grows that work by governments around the world will have the desired effect of boosting the economy. In particular, Japan's economy beat expectations for growth in the first quarter of the year; some credited Abenomics. 

Some stock markets across Asia edged up on Thursday after solid growth data from Japan improved sentiment although Tokyo's Nikkei lagged, while worries about a prolonged recession in the euro zone kept the common currency under pressure.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.3 percent, with mainland China stocks up 0.8 percent and South Korean stocks nearly 1.0 percent higher.

"The market is turning around as optimism is growing that efforts by global governments including South Korea's to stimulate the economy will pay off," said Lee Jae-mahn, a market analyst at Tong Yang Securities.

The Nikkei, however, fell 1.1 percent after earlier hitting a fresh 5-1/2-year high. Still, it is up a staggering 44 percent this year.

"The pace of the rise has been too fast. It's a healthy correction," said Norihiro Fujito, strategist at Mitsubishi UFJ Morgan Stanley Securities of the Nikkei.

Japan's economy grew 0.9 percent in the first quarter, the quickest pace in a year, beating expectations for a growth rate of 0.7 percent.

"This is undoubtedly very strong growth, and very positive for Japan's economy," said Yoshiki Shinke, senior economist, Dai-Ichi Life Research Institute in Tokyo.

"It's no longer just about brightening sentiment and rises in equities prices. There's now proof that Abenomics is working and that the economy is on a solid footing."

The report stood in stark contrast to the euro zone, which showed the region contracting for a sixth straight quarter as France slid into recession and Germany registered a mere 0.1 percent growth.

The euro zone data had raised expectations for more monetary easing by the European Central Bank, prompting investors to sell the euro.

The euro fetched $1.2873, having fallen more than 0.4 percent to as far as $1.2843 on Wednesday. Against the yen, it was at 131.46, off a three-year peak of 132.78 set earlier in the week.

"The euro zone has registered six straight quarters of contraction and any recovery is likely to be limited in the months ahead," said Mitul Kotecha, global head of foreign exchange at Credit Agricole in Hong Kong.

"Pressure on the ECB to provide more policy accommodation will only be reinforced by today's release of the April CPI data leaving the euro under further pressure. Near term technical support for EUR/USD is seen around 1.2772."

Gold also struggled after a 2-percent slide in the previous session. Spot gold was around $1,395 an ounce, having briefly touched a fresh one-month low near $1,387.

Brent crude was little changed at $103.60 a barrel, holding on to Wednesday's 1.0-percent gain.