Portugal Colonial - Europe stocks climb on US debt vote, slowing eurozone inflation

Asian stocks and the dollar diverged as traders also turned their attention to the Federal Reserve's next policy meeting and China's struggling economy.

Oil prices flatlined as traders paused for breath following recent heavy losses.

"As the United States takes another step away from avoiding a disastrous default, risk sentiment has improved on financial markets," said Susannah Streeter, head of money and markets at stockbroker Hargreaves Lansdown.

The bill now goes to the Senate before President Joe Biden can sign it off, allowing the government to borrow more cash to service its mammoth debts.

Failure to do so before the deadline of cash running out -- said to be June 5 -- would have resulted in a default that many warned would hammer the global economy.

- Rare cooperation -

After weeks of political turmoil, Democrats and Republicans came together to push through an agreement to lift the US borrowing limit in a rare display of bipartisan cooperation.

Hardline Republicans had warned they would shoot down the deal, saying it did not have enough spending cuts, while some Democrats were also angry at the reductions made.

European equities and the euro were also bolstered Thursday by data showing that eurozone inflation decelerated to 6.1 percent in May.

It was a sharp slowdown from 7.0 percent in April, but the rate remains well above the European Central Bank's target of 2.0 percent.

"Inflation in the eurozone has been falling faster than anticipated," said Richard Flax, chief investment officer at Moneyfarm.

"The retreat in headline figure has been largely driven by lower energy costs, although this is unlikely to stop the ECB from pressing ahead with further rate rises," he said.

- China worries linger -

Uncertainty over the chances of another interest rate hike by the US Fed and ongoing weakness in China's economy dampened the mood in Asia.

The Chinese economy continues to show signs of fragility after a rally sparked by the lifting of zero-Covid measures last year fades.

On Wednesday, figures showing that the country's vast manufacturing sector contracted further last month highlighted the big job Beijing faces in kickstarting growth.

But there was some good news Thursday in a private survey that suggested China's economy had expanded slightly, as the Caixin manufacturing index reading beat estimates for a contraction.

Traders were now awaiting Friday's release of US job figures, which will be pored over for an idea about the state of the world's biggest economy.

Continued strength in the labour market has been a key factor in the Fed's decision to keep raising interest rates for more than a year as it tries to rein in inflation.

- Key figures around 1100 GMT -

London - FTSE 100: UP 0.4 percent at 7,474.34 points

Paris - CAC 40: UP 0.7 percent at 7,150.61

Frankfurt - DAX: UP 1.1 percent at 15,842.77

EURO STOXX 50: UP 1.0 percent at 4,260.18

Tokyo - Nikkei 225: UP 0.8 percent at 31,148.01 (close)

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 18,216.91 (close)

Shanghai - Composite: FLAT at 3,204.63 (close)

New York - Dow: DOWN 0.4 percent at 32,908.27 (close)

Euro/dollar: UP at $1.0695 from $1.0689 on Wednesday

Dollar/yen: UP at 139.84 yen from 139.34 yen

Pound/dollar: DOWN at $1.2430 from $1.2441

Euro/pound: UP at 86.03 pence from 85.92 pence

Brent North Sea crude: UP 0.1 percent at $72.65 per barrel

West Texas Intermediate: FLAT at $68.13 per barrel

L.E.Campos--PC