Volkswacht Bodensee - Stocks advance as inflation slows

With the US Federal Reserve and European Central Bank raising interest rates to tame inflation, markets were eagerly waiting for the latest inflation data to see if monetary policymakers have room to pause hikes given recent turmoil in the banking sector.

The eurozone's annual inflation rate slowed sharply to 6.9 percent in March from 8.5 percent in February, beating expectations as energy prices eased, the EU's statistics agency said.

In the United States, the PCE Price Index, the Federal Reserve's preferred measure of inflation, showed inflation slowed to an annual rate of 5.0 percent in February from 5.3 percent.

Wall Street opened higher, with the Dow climbing 0.4 percent, while Europe's main equity indices were all higher in afternoon trading.

The dollar held onto gains made ahead of the release of the data.

The core PCE Price Index that excludes volatile energy and food prices showed a smaller annual decline to 4.6 percent from 4.7 percent in January, and month-on-month increased by 0.3 percent.

Briefing.com analyst Patrick O'Hare said the key takeaway from the report is that it only showed a slight deceleration in inflation "which gives the Fed an argument to continue hiking rates."

The eurozone data also showed eurozone core inflation edged up to 5.7 percent on an annual measure.

"Headline inflation is coming down sharpish due to energy base effects -- but core is rising and showing an extremely sticky tendency which is the real worry," noted Finalto analyst Neil Wilson.

Inflation still remains well above the two-percent level targeted by the European Central Bank (ECB), despite falling from a peak of 10.6 percent in October.

Turmoil in the US and European banking sectors this month -- which saw the collapse of three US banks and the forced takeover of Credit Suisse by UBS -- was triggered in part by rising interest rates.

With fears over banks subsiding, traders are refocusing on the battle against inflation.

Expectations for how high borrowing costs will go have changed as banks are likely to cut back on lending, which could mean central banks won't need to raise rates as much as previously expected.

That has helped push up global equities, which had been under pressure through February and March.

London stocks were boosted by upgraded data showing that the UK economy grew 0.1 percent in the fourth quarter of last year to narrowly avoid recession. An initial reading had output flat in the final three months of last year.

In Asia, stock markets built on gains as banking-sector worries faded and traders grew optimistic that central banks could be near the end of their rate-hiking cycle.

Hong Kong stocks were boosted also by a rally in tech firms after it emerged that e-commerce giant Alibaba's logistics arm was preparing for a listing in the city.

News of the IPO by Cainiao Network Technology came after Alibaba said it intended to split into six units and go public.

Factory and services activity data suggesting that China's powerhouse economy continued to improve also lifted confidence.

- Key figures around 1330 GMT -

New York - Dow: UP 0.4 percent at 32,996.85 points

London - FTSE 100: UP 0.3 percent at 7,643.39

Frankfurt - DAX: UP 0.6 percent at 15,612.71

Paris - CAC 40: UP 0.6 percent at 7,309.44

EURO STOXX 50: UP 0.5 percent at 4,306.25

Tokyo - Nikkei 225: UP 0.9 percent at 28,041.48 (close)

Hong Kong - Hang Seng Index: UP 0.5 percent at 20,400.11 (close)

Shanghai - Composite: UP 0.4 percent at 3,272.86 (close)

Euro/dollar: DOWN at $1.0880 from $1.0905 on Thursday

Pound/dollar: DOWN at $1.2375 from $1.2386

Euro/pound: DOWN at 87.91 pence from 88.04 pence

Dollar/yen: UP at 133.13 yen from 132.70 yen

Brent North Sea crude: UP 0.6 percent at $79.72 per barrel

West Texas Intermediate: UP 1.3 percent at $75.33 per barrel

burs-rl/lth

A.Gasser--BTB