Developed and emerging equity markets diverged on Thursday with the latter falling on worries China will take more measures to temper growth after reporting its fastest quarterly growth in two years.

Bourses in Europe and Japan, however, put in gains with many investors waiting for the next batch of U.S. earnings reports, which include Goldman Sachs .

The euro hit a five-month low against the dollar as worries over euro zone member Greece continued to grind. The dollar rose to a 4-1/2 month high against a basket of currencies <.DXY>

China's annual gross domestic product rose 10.7 percent in the fourth quarter, while third quarter growth was revised up to 9.1 percent. Growth for the year was 8.7 percent, surpassing Beijing's 8.0 percent target.

Consumer inflation rose to 1.9 percent in December on the year from 0.6 percent the previous month.

This left many analysts expecting more policy tightening from China and its impact on global recovery.

Since major economies in the world are still struggling over the timing of their exit strategies, speculation about China tightening would raise worries about the impact on the world economy short term, said Jun Kato, senior chief analyst at Shinkin Central Bank Research Institute.

Emerging market stocks as measured by MSCI <.MSCIEF> were down around three-quarters of a percent.

But Japan's Nikkei <.N225> closed up 1.2 percent, partly on export prospects from a weaker yen.

The pan European FTSEurofirst 300 <.FTEU3> was up 0.2 percent, driven by banks and what analysts said was a belief that the market had sold off too much on Wednesday when it fell 1.5 percent.

As well as Goldman Sachs, investors were also eyeing Google earnings, although these will be released after European markets close.

EURO SLIDES

The euro hit a 5-month low against the dollar before recovering, while the Australian dollar recouped losses after the higher-than-expected Chinese data.

The euro was flat on the day at $1.4093, recouping some losses after hitting the low of $1.4067 on trading platform EBS.

Analysts said the euro remained vulnerable on fiscal concerns of euro zone peripheral economies, particularly debt-laden Greece.

The spread between Greek and German 10-year bond yields hit 311 basis points, its widest since Greece joined the euro in 2001.

Momentum is now on the side of the euro bears and it is difficult to see this ending anytime soon, said Stuart Bennett, currency strategist at Calyon.

(Additional reporting by Tamawa Desai and Kaori Kaneko, editing by Mike Peacock)

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