Shares in Europe opened higher on Friday after a mixed day in Asia following another encouraging report about US inflation.
The United Kingdom saw its economy contract 0.1% in the last quarter as households cut spending to cope with the rise in prices. The decline was better than most forecasts.
“So basically, it’s bad but not as bad as was feared and it may be as good as it gets for a while,” Oanda’s Craig Erlam said in a report. He said domestic spending is likely to weaken further as Britain prepares for much higher energy prices as a result of supply disruptions caused by the war in Ukraine.
Britain’s FTSE 100 rose 0.6% to 7,507.81 and Germany’s DAX also gained 0.6% to 13,775.16. In Paris, the CAC 40 rose 0.5% to 6,574.96.
Futures for the S&P 500 and the Dow Jones Industrial Average were up 0.5%. On Thursday, the S&P 500 lost 0.1%, the Dow 0.1% and the Nasdaq lost 0.6%. All three indices were on pace for weekly gains.
The report showed Thursday that US inflation at the wholesale level slowed more than economists expected last month, a day after a cooler-than-expected reading on inflation at the consumer level. Such data has raised hopes among investors that decades of high inflation may be nearing a peak and that the Federal Reserve will be less aggressive than fears about raising interest rates.
However, inflation is still very high and the economy has given false signals before the relief was only for investors to pull the rug from under them. Some Fed officials also commented after Wednesday’s inflation report, saying their fight against rising prices was not over.
Tokyo’s Nikkei 225 rose 2.6% to 28,546.98 in Asian trade. Seoul’s Kospi rose 0.2% to 2,527.94 and the Hang Seng in Hong Kong rose 0.4% to 20,175.62.
Sydney’s S&P/ASX 200 was down 0.5% at 7,032.50, while the Shanghai Composite Index slipped 0.2% to 3,276.89.
Enough hope for a peak in inflation and Fed aggression has created that the S&P 500 has nearly halved its losses from earlier in the year. It is up more than 14% from its low in mid-June.
Concerns about a possible recession are still on the market, as the Federal Reserve continues to raise interest rates to fight inflation.
Fewer US workers than expected in a report on Thursday filed for jobless claims last week, a potentially encouraging sign about layoffs. But still it was the highest number since November.
Traders are now betting on the Fed to raise interest rates by half a percentage point overnight at next month’s meeting, down from the Fed’s previous two hikes of 0.75 percentage points. Even though the Fed can manage to slow the economy to stamp out inflation without a recession, higher interest rates tend to drag down prices for all types of investments.
In other trade Friday, US benchmark crude oil reversed opening losses at $94.45 a barrel, up 11 cents in electronic trading on the New York Mercantile Exchange. On Thursday, it jumped $2.41 to reach $94.34 a barrel.
Brent crude, the pricing base for international trade, rose 42 cents to $99.98 a barrel.
The US dollar rose from 133.03 yen to 133.33 Japanese yen. The euro fell from $1.0322 to $1.0294.