New orders for long-lasting U.S. manufactured goods rose more than expected in May as bookings for transportation equipment rebounded strongly, according to a government report on Friday that could allay fears of a sharp slowdown in factory activity.

U.S. economic growth was revised modestly higher in the first quarter to account for a slightly faster pace of restocking by businesses and a smaller increase in imports, government data showed on Friday, but remained anemic.

COMMENTS:

KURT KARL, CHIEF U.S. ECONOMIST, SWISS RE, NEW YORK

There was a little improvement in the GDP annualized and the durables goods orders are better than expected. A punch from aircraft but even non-defense ex-aircraft is doing well so the capital goods outlook is pretty strong. It is a good report. That is for May which would be post the shock of Japan.

What I am seeing is a turning around. We had a lot of bad news at the beginning of the year, initially it was oil prices and then it was Japan, and some of the things have been price impacts with the weak dollar. There has been a whole bunch of little negatives, but the way I'm looking at it is these negatives are all temporary.

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

After orders for durable goods dropped 2.7% in April, May manufacturing activity mustered to recover most of the decline, as orders grew by 1.9%. This is an encouraging report considering the influx of manufacturing surveys suggesting an impending slowdown in the industry, and April's decline was upwardly revised from an original decline of 3.6%. However, the good tone may not follow reflecting June data.

MARKET REACTION: STOCKS: U.S. stock index futures rise. BONDS: U.S. bond prices extend losses. FOREX: The euro pares losses versus dollar.

Japan