London (AFP) - Equities in Europe and Asia mostly rose Friday as slowing US inflation fuelled speculation the Federal Reserve would take a softer approach to its monetary tightening campaign, though New York stocks were more tentative on bank downturn worries.
European indices also won a boost from data showing that the German economy, Europe's powerhouse, grew by a better-than-expected 1.9 percent last year.
London shares were cheered by unexpected but slender British economic growth for November.
"The FTSE 100 is closing in on record highs as the UK's unexpected GDP growth caused a welcome swell for the market," said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
"Investors are also eyeing the fact that US inflation has continued to weaken, which has added to hopes that the Federal Reserve could be convinced to maintain, if not downgrade, the current interest rate hiking cycle, which has sent positive ripples across the wider eurozone," she said.
Shares in London closed 0.6 percent higher, while in Paris they rose 0.7 percent and in Frankfurt 0.2 percent.
Wall Street stocks opened lower but regained ground after major US banks reported mixed fourth-quarter results, with executives pointing to the rising odds of a "mild recession".
The biggest US bank, JPMorgan Chase, said it had set aside $1.4 billion in fresh reserves in case of loan defaults, noting that its "central" scenario was "a mild recession" with somewhat higher unemployment.
It followed a buoyant session Thursday after a report showed that US consumer inflation fell in December to the lowest level in over a year -- rising 6.5 percent from a year ago, the smallest increase since October 2021.
That bolstered bets that the Federal Reserve would lift interest rates by just 0.25 percentage points next month, easing worries about a possible recession for the world's largest economy.
The reading added to the optimism flowing through trading floors at the start of the year as investors put a painful 2022 behind them and focused on a recovery in the global economy.
Fed policymakers have been hiking borrowing costs since March, including four major hikes of 75 percentage points each, as they struggle to get a grip on inflation that reached four-decade highs.
Strong yen
Most Asian markets tracked the New York rally, lifted also by optimism over China's reopening from the pandemic, though Tokyo shares dropped as a strong yen fanned fears that major exporters could suffer.
Shanghai, Sydney, Seoul, Mumbai, Singapore, Jakarta, Taipei, Wellington and Manila were all in the green.
Hong Kong also extended its winning streak despite a report saying the Chinese government was considering taking "golden shares" in giants Alibaba and Tencent, giving it a tighter grip on the tech sector.
Traders also shook off data showing a bigger-than-expected drop in Chinese imports and exports last month, on hopes Beijing's easing of strict Covid lockdowns and other restrictions will spur further an economic revival going forward.
Oil was set to end the week on an upbeat note, energised by Chinese demand hopes and slowing US inflation.
Key figures around 1645 GMT
London - FTSE 100: UP 0.6 percent at 7,844.07 points (close)
Frankfurt - DAX: UP 0.2 percent at 15,086.52 (close)
Paris - CAC 40: UP 0.7 percent at 7,023.50 (close)
EURO STOXX 50: UP 0.6 percent at 4150.80
New York - Dow: FLAT at 34,202.15
Tokyo - Nikkei 225: DOWN 1.3 percent at 26,119.52 (close)
Hong Kong - Hang Seng Index: UP 1.0 percent at 21,738.66 (close)
Shanghai - Composite: UP 1.0 percent at 3,195.31 (close)
Euro/dollar: DOWN at $1.0806 from $1.0853 on Thursday
Dollar/yen: DOWN at 127.90 yen from 129.25 yen
Pound/dollar: DOWN at $1.2191 from $1.2210
Euro/pound: DOWN at 88.63 pence from 88.89 pence
Brent North Sea crude: UP 1.0 percent at $84.88 a barrel
West Texas Intermediate: UP 1.4 percent at $79.48 a barrel
