London (AFP) - European and US stocks advanced Friday and the dollar fell as investors digested key US jobs data that dampened expectations of more aggressive Federal Reserve interest rate hikes.
On Wall Street, the Dow Jones Industrial Average rose 1.7 percent after sliding the day before, while European shares closed with strong gains, following the latest data signalling resilience in the US labour market despite efforts to cool the economy.
"Stocks are getting a boost here as Fed rate hike bets get slashed, but earnings risks should keep the gains somewhat limited," Edward Moya, senior market analyst at Oanda said.
"The focus will shift to next week's inflation report and traders should not be surprised if inflation falls even further than expected."
Global equities have enjoyed a largely solid start to the new year after a dismal 2022 marked by concerns about the war in Ukraine and central bank rate hikes aimed at taming soaring prices.
US job gains exceeded expectations in December while unemployment ticked down, a closely-watched government report said Friday.
A strong labour market is an area of concern for the Federal Reserve since high wages can feed into inflation.
The Fed, along with central banks worldwide, last year kickstarted a string of aggressive rate hikes to battle decades-high inflation.
In a more encouraging sign for the Fed -- also welcomed by market analysts -- the latest US jobs data showed a tempering of wage growth.
The dollar fell Friday versus the pound over what dealers said were dimming expectations of more aggressive interest rate hikes from the Fed.
"A combination of slightly slower US wages growth, and a disappointing ISM services report for December has seen the US dollar slide back sharply, pulling the pound off its lowest levels since November...as traders pare back bets that the Fed might hike by 50bps in February," CMC Markets analyst Michael Hewson told AFP.
The dominant US services sector contracted for the first time in more than two years in December, survey data showed on Friday, as business activity slumped.
- Optimism -
In Paris, the CAC 40 rose 1.5 percent, its highest closing level since before the Ukraine war.
Frankfurt ended 1.2 percent higher and London closed 0.9 percent higher.
Official data Friday showed that annual inflation in the eurozone dropped for a second month in a row, to 9.2 percent in December.
It was the first decline into single digits since September and while inflation shows signs of cooling around the world, it remains at sky-high levels.
In Asia, Hong Kong's stock market dipped after three days of gains, while Singapore, Mumbai, Wellington and Manila were also in the red.
Shanghai edged up, with help from reports saying China was considering relaxing strict rules on borrowing for property developers.
Tokyo, Sydney, Seoul, Taipei, Bangkok and Jakarta also rose.
Still, there is a general sense of optimism in Asia as China emerges from almost three years of zero-Covid lockdowns and other strict containment measures.
There is hope that the easing of restrictions will see a boom in countries' tourism industries, and Hong Kong is a major beneficiary, with the border set to open at the weekend.
China's swift exit from zero-Covid has nonetheless caused plenty of concern as infections soar across the country and put further pressure on the already stuttering economy.
Key figures around 1645 GMT
London - FTSE 100: UP 0.9 percent at 7,699.49 points (close)
Frankfurt - DAX: UP 1.2 percent at 14,610.02 (close)
Paris - CAC 40: UP 1.5 percent at 6,860.95 (close)
EURO STOXX 50: UP 1.5 percent at 4,017.83
New York - Dow: UP 1.7 percent at 33,475.03
Tokyo - Nikkei 225: UP 0.6 percent at 25,973.85 (close)
Hong Kong - Hang Seng Index: DOWN 0.3 percent at 20,991.64 (close)
Shanghai - Composite: UP 0.1 percent at 3,157.64 (close)
Euro/dollar: UP at $1.0620 from $1.0524 on Thursday
Pound/dollar: UP at $1.2056 from $1.1909
Euro/pound: DOWN at 88.04 pence from 88.34 pence
Dollar/yen: DOWN at 132.31 yen from 133.42 yen
West Texas Intermediate: UP 1.6 percent at $74.83 a barrel
Brent North Sea crude: UP 1.4 percent at $79.76 a barrel
