Global stocks and the dollar edged up on Friday, erasing some losses from the previous day, as stronger-than-expected Chinese inflation data eased some concerns about the health of the world’s second-biggest economy.
September producer prices in China unexpectedly rose for the first time in nearly five years, while consumer inflation also beat expectations, setting the tone for equity markets globally.
European shares tracked Asian markets higher. The pan-European STOXX 600 was up 0.9 percent, led higher by its mining stocks, while MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.6 percent.
However, equities were still set for their largest weekly drop in over a month after a week which has seen expectations of a Federal Reserve rate hike build and substantial volatility in commodity prices.
While the MSCI World index was up 0.2 percent on Friday, it was down 1.2 percent for the week – its biggest weekly drop since early September.
“Inflation has been quite a worry for some time, but the PPI number today is a very nice change, and a much better number than the negative numbers we had prior. So that gives us a bit of confidence,” said Veronika Pechlaner, European equity fund manager at Ashburton, who said that the falls this week were not a major cause for concern.
“The market felt exuberant heading into this week… We’ve had a strong couple of months, so now a bit of normalisation is coming through.”
The dollar index rose 0.4 percent to 97.908, and was set for a weekly gain. It was down slightly from a seven month high touched on Thursday.
Retail sales data and remarks from Federal Reserve Chair Janet Yellen and Boston Federal Reserve President Eric Rosengren were due later in the day. The Fed’s minutes from its September meeting prompted investors to raise their bets on a December rate rise, and fuelled the rally in the greenback this week.
The strength of both domestic and global growth will be a key consideration for the Fed, demonstrated when weak Chinese export numbers on Thursday not only hit global equities but also stopped a rise in US yields and halted the dollar’s advance.
Even despite Friday’s inflation data, Chinese stock ended little changed on Friday as investors wrestled with the mixed economic picture. The producer price increase will be good news for profits and for Beijing as the government struggles to reduce a mountain of corporate debt.
The greenback, which slid Thursday to 103.340 yen on the Chinese trade data, gained 0.5 percent to 104.22 yen, edging back towards a 2-1/2-month peak of 104.635. It was on track to gain 1.3 percent on the week.
The euro slipped 0.5 percent to $1.1009 after seeing a 2-1/2-month low of $1.0985 on Thursday. The common currency was en route for a 1.7 percent weekly loss. European bond yields edged higher ahead of Yellen’s speech.
Elsewhere in currencies, the pound dipped 0.5 percent to $1.2192. It was on track to lose 1.9 percent this week.
Comments by European Council President Donald Tusk, who will run the Brussels side of Britain’s negotiations on leaving the EU, that the bloc will not offer London any softer terms than a “hard Brexit” helped keep the pound under pressure. Such a deal would end Britain’s membership of the single market and disrupt access to the country’s main trading partner.
Sterling also fell against the euro, but was off of the week’s lows against both the euro and the dollar. Several Bank of England policymakers are due to speak on Friday, and markets are keen for clues on whether another cut in interest rates is likely, following one cut in the summer after the referendum.
The Singapore dollar hit a seven-month low after the economy unexpectedly contracted in the third quarter, keeping alive easing prospects even though the central bank stood pat on policy earlier in the day.
Thailand’s stocks rose 4 percent and the baht gained about 0.9 percent versus the dollar after the government urged the country to remain calm after the death of King Bhumibol Adulyadej.
“On the assumption that the succession goes smoothly, I would assume that foreign investor inflows will continue,” said Andrew Bresler, director at Saxo Capital Markets based in Singapore.
The Turkish lira fell again, though it was up from Thursday’s record low. The market is anxious over government plans to push through an executive presidential system.
Crude oil extended gains after bouncing overnight on a U.S. government report showing hefty draws in diesel and gasoline.
Brent crude was up 0.8 percent at $52.46 a barrel, having risen to a one-year peak of $53.73 on Monday on expectations for an OPEC output cut.