Stocks rebounded in Europe and Asia yestersday after robust Japanese data reassured investors about global growth prospects, and oil prices pulled back from their 21-year highs.

The yen pushed higher against the dollar but the euro slipped across the board after a survey of optimism among investors and analysts in Germany fell more than expected.

Wall Street looked set for a positive start after US stocks hit their lowest levels this year on Monday.

European stocks bounced from Monday?s 2004 lows, supported by the firmer close in Tokyo.

?(Japan?s GDP data) confirms our view that the fundamental outlook for global growth has not changed markedly,? said Anais Faraj, a strategist at Nomura.

The FTSE Eurotop 300 index was up 0.42 percent and the narrower DJ Euro STOXX 50 index 0.24 percent.

Japanese gross domestic product grew a real 1.4 percent in the first quarter, beating forecasts.

?Better than expected economic data out of Japan has underlined the country?s economic recovery and there?s an acceptance that markets overreacted yesterday to further oil price rises,? said Matthew Buckland, a trader at CMC Group.

In Tokyo, the Nikkei average rose 1.96 percent after falling more than three percent to a three-month closing low on Monday. The broader TOPIX index gained 2.13 percent.

Oil prices pulled back from 21-year highs but analysts said surging fuel demand and oil?s popularity with hedge funds was likely to keep US crude above $40 a barrel for the time being.

US light crude was down 51 cents a barrel at $41.04, off Monday?s intraday peak of $41.85, the highest since futures were launched on the New York Mercantile Exchange in 1983.

Brent crude for June was down 53 cents at $37.38.

?The supply-demand balance hasn?t changed. Demand is strong and there?s very little room to increase production. It?s a dangerous market,? said Tetsu Emori, Chief commodities strategist at Mitsui Bussan Futures in Tokyo.

<B>Japan GDP lifts yen, Euro dips after ZEW</B>

Japan?s strong GDP data lifted the yen against the dollar and calmed fears that soaring oil prices and rising US interest rates would jeopardise Japan?s export-led recovery.

?The Japanese figure was very strong and has given the yen a lift,? said Bilal Hafeez, Foreign exchange strategist at Deutsche Bank.

The yen was up more than half a percent at 113.80 per dollar. The euro was last at $1.1965, compared with $1.2015 in late New York trade on Monday after a key German confidence measure came in weaker than expected.

The ZEW institute?s gauge of optimism among German analysts and investors fell to 46.4 in May from 49.7 the previous month.

US stock index futures were up yestersday, indicating Wall Street would also rebound.

Indian shares bounced back from their biggest one-day loss on Monday, as investors returned despite concern over the new leftist-backed government?s commitment to economic reform.

Bombay?s benchmark index was up more than eight percent after closing down 11 percent on Monday and losing 24 percent in the last three weeks.

Stronger equities helped weaken euro zone government bond prices, which had gained sharply on Monday as investors sought safe havens.

The yield on the two-year Schatz note was up 0.5 basis point at 2.52 percent. The 10-year Bund was yielding 4.29 percent, up 1.1 basis points.

Prices briefly rose after the US Commerce Department said housing starts fell 2.1 percent in April after a 6.1 percent rise in March but they quickly pulled back

Nigel Stephenson