Volkswacht Bodensee - US stocks shrug off sticky inflation data, Europe mixed

Both the US Federal Reserve and the European Central Bank have adopted a more data-dependent approach on whether to increase interest rates further.

That made the latest inflation data all the more important ahead of the next monetary policy meetings due in September.

The Fed's preferred measure of inflation, the PCE Price Index, rose to a 3.3 percent annual increase in July, versus a 3.0 percent increase in June.

The 0.2 percent month-over-month in the headline and core price index which excludes volatile food and fuel prices were in line with expectations.

"The key takeaway from the report would have to be the uptick in the year-over-year inflation readings," said Briefing.com analyst Patrick O'Hare.

While the increases weren't "eye-popping", said O'Hare, "they should catch the Fed's eye as a basis not to cut rates anytime soon".

In the latest data on unemployment claims, a dip of first-time claims for benefits, showed the US labour market remains tight.

Investors have largely been worrying about the possibility of a further increase in interest rates by the Fed, but the data didn't seem to cause worry, with Wall Street's major stock indices pushing higher.

Meanwhile, stocks in Frankfurt rose while Paris fell after data showed the annual rate of inflation in the eurozone remained unchanged in August at 5.3 percent as a smaller drop in energy prices balanced out a slowdown in the rise of food and drinks costs.

Analysts said the data increased the chance of the European Central Bank deciding against a further hike to interest rates in the eurozone next month. That in turn weighed on the euro.

"With unemployment starting to show signs of increasing across the bloc, markets are starting to price an increased probability of a pause in the ECB’s rate hiking cycle when the governing council next meets on September 14th," said market analyst Michael Hewson at CMC Markets.

In Asia, China revealed that factory activity shrank again this month while services weakened, which will likely pile further pressure on authorities to press ahead with measures to kickstart the sputtering economy.

Officials have announced a series of pledges to help various sectors -- particularly the property industry -- and there is an expectation that more is on the way.

In the latest measure, local reports Thursday said the central bank is drawing up policies that will make it easier for private firms, including developers, to access funding.

However, analysts say the only thing that will appease investors is a wide-ranging "bazooka" of big spending.

Fresh data showing the country's manufacturing sector contracted for a fifth straight month in August added to the arguments for more help.

And the need to provide support to the embattled real estate sector was highlighted Wednesday when industry giant Country Garden reported losses of about $6.7 billion for the first half of the year and warned of possible default.

The company's cash flow problems have ignited fears that it could collapse and spread turbulence through China's economy and financial system.

On the corporate front, shares in UBS jumped six percent after the bank giant said it would fully absorb the Swiss unit of its recently-swallowed rival Credit Suisse.

- Key figures around 1530 GMT -

New York - Dow: UP 0.1 percent at 34,940.12 points

London - FTSE 100: DOWN 0.5 at 7,439.13 (close)

Frankfurt - DAX: UP 0.4 percent at 15,947.08 (close)

Paris - CAC 40: DOWN 0.7 percent at 7,316.70 (close)

EURO STOXX 50: DOWN 0.4 percent at 4,297.11 (close)

Tokyo - Nikkei 225: UP 0.9 percent at 32,619.34 (close)

Hong Kong - Hang Seng Index: DOWN 0.6 percent at 18,382.06 (close)

Shanghai - Composite: DOWN 0.6 percent at 3,119.88 (close)

Euro/dollar: DOWN at $1.0848 from $1.0925 Thursday

Pound/dollar: DOWN at $1.2671 from $1.2719

Dollar/yen: DOWN at 145.63 yen from 146.23 yen

Euro/pound: DOWN at 85.59 pence from 85.87 pence

Brent North Sea crude: UP 0.9 percent at $86.66 per barrel

West Texas Intermediate: UP 1.2 percent at $82.57 per barrel

burs-rl/giv

B.Shevchenko--BTB