US Stocks Overcome Inflation Fears But Europe Succumbs

Wall Street ended October's trading with a flourish on Friday, with all three indices hitting records despite disappointing corporate earnings and more high inflation data, but the enthusiasm was not shared worldwide.

After a lackluster start to the day's trading, the Dow, Nasdaq and S&P 500 all made new records by the close, though the gains were not particularly large.

Traders overcame US Commerce Department data showing inflation rising 4.4 percent in September compared to the same month in 2020, its biggest jump since January 1991, as well as Apple and Amazon results that were dented by supply chain troubles.

"The market has been all over the place," said Peter Cardillo of Spartan Capital Securities, noting the government also reported an unexpectedly large decline in income and a less surprising increase in spending last month.

Despite Apple and Amazon's troubles, Cardillo pointed to better results from companies like Ford, ExxonMobil and Chevron, saying indices were "supported by strong earnings, and that's why the broader market turned up at the end."

Earlier in the day, Asian stock markets finished mixed, while European indices mostly retreated after data showed eurozone inflation rising.

The dollar rose against its main rivals, gaining one percent against the euro as speculation mounts that the Federal Reserve will announce next week plans to pull back on its monthly bond purchases.

The eurozone economy was so far maintaining its steady recovery from Covid-19 restrictions, growing at 2.2 percent in the third quarter of the year, according to data released Friday.

But year-on-year inflation hit 4.1 percent in October, more than double the European Central Bank's (ECB) target and tying the record rate last seen in July 2008, as energy prices jumped almost a quarter, the agency said.

Analyst Michael Hewson at CMC Markets called the annual increase "another reminder of the risks of the ECB's current ultra-loose monetary policy" and said it "adds to the pressure on a central bank that appears to be in denial as markets price in ever increasing inflation risks."

A growing number of countries have hiked interest rates to battle price spikes, but the ECB said the medium-term inflation outlook remains below its two percent target and a rate increase remains off the table.

The Federal Reserve is also not expected to lift its rate from zero until next year, though the Bank of England may next week raise its lending rate from a record low 0.1 percent.

In Asia, Hong Kong and Shanghai stock markets were handed some support by a report that property group China Evergrande had made an overdue interest payment ahead of a Friday deadline, buying it a little more breathing space as it struggles to address a debt crisis that many fear could spill over into the wider economy.