Stocks rallied in both Europe and the U.S. as banking stocks gained and China’s second-quarter growth slowed, but didn’t fall off a cliff.

The U.S.-centric S&P Retail index advanced 1.4 percent, or 8.43 points, to 613.22, as the Dow Jones Industrial Average rose 1.6 percent, or 203.82 points, to 12,777.09. The retail gainers were led by New York & Company Inc., which rose 18.9 percent to $4.21 after raising its second-quarter guidance. The company now expects operating losses of $5 million to $7 million for the period versus a deficit of $15.1 million a year earlier.

The Chinese economy grew by 7.6 percent in the second quarter, down from 8.1 percent in the first quarter, according to official government statistics. That’s enough of a slowdown to have some investors looking for the government to step in to stimulate the economy.

“This is a less vicious downslide compared with the global financial crisis if measured by peak-to-trough deceleration, but nearly as bad as in the Asian financial crisis,” said IHS Global Insight China Economist Xianfang Ren. “Domestic macro control and weakening external demand are the causes of the slowdown, but it is policy miscalculation and larger-than-anticipated shock from the Euro Zone which have caused the stalling in [the second quarter].”

In Europe, the DAX in Frankfurt climbed 2.2 percent to 6,557.10, followed by the CAC 40 in Paris, up 1.5 percent to 3,180.81. The FTSE 100 in London closed ahead 1 percent to 5,666.13, while the FTSE MIB in Milan ended the day up 1 percent to 13,714.68.

Luxury goods stocks had good day. Burberry, after falling earlier this week on slowing sales growth, was the FTSE 100’s second best performer, rising 6.1 percent to 12.29 pounds. And LVMH Moët Hennessey Louis Vuitton was among the CAC 40’s top performers, rising 3.5 percent to 118.85 euros. Those stocks were said to be boosted by the prospect of stimulus for China.

Other risers in the fashion and luxury sector included Ferragamo, which surged 6.6 percent to 15.32 euros; Richemont, up 3.7 percent to 50.20 Swiss francs; Yoox, up 3.4 percent to 11.06 euros and PPR, which climbed 2.1 percent to 109.25 euros.

The pound traded for $1.55 against the dollar, while the euro traded for $1.22 and the Swiss franc for $1.02. The Hong Kong dollar traded for 12 cents.

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