Volkswacht Bodensee - European stocks up despite recession warnings, US shares extend rally

Frankfurt and Paris managed to advance by more than half a percent by the end of trading, although gains were capped as the European Union warned that the eurozone was set to fall into recession this winter.

US stocks also ended higher, extending Thursday's rally after closely-watched government data showed annual inflation in the world's biggest economy had eased slightly -- dimming expectations of more aggressive interest rate hikes from the Federal Reserve.

Oil prices picked up as well following China's announcement that it would relax some of its hardline Covid-19 restrictions, including shortening its quarantine requirements for international travelers by two days.

"This has been sufficient to prevent more than modest losses on some indices, with the week ending in a far more optimistic tone," noted Chris Beauchamp, chief market analyst at online trading platform IG.

"Confident for now that the Fed can walk back some of its most hawkish rhetoric, stocks look well set for additional gains into the second half of November."

The dollar slumped against rival currencies following the inflation data release, at one point reaching a three-month low against the euro and weakening against the yen and pound.

- 'Bordering on silly' -

But Daniel Berkowitz, senior investment officer for Prudent Management Associates, struck a note of caution on the slower inflation rate.

"While it always feels good to see markets rally, we think this... is bordering on silly," he said.

"The market is reacting as if this is the continuance of a multiple-month, downward trend in inflation, and it is not," he added.

Michael Hewson, chief market analyst at CMC Markets UK, also said that markets appeared to be "getting slightly ahead of themselves" given that the quarantine to enter China remains long, and that Covid infection rates are rising rather than decreasing.

London's benchmark FTSE 100 index ended in the red after official data indicated that the UK economy was probably at the start of a prolonged recession.

"The FTSE's struggles suggest UK investors are more worried about deteriorating domestic, eurozone and global economies than (they) are hopeful about the US and other central banks easing rate hikes," noted Fawad Razaqzada, market analyst at City Index trading group.

In the UK, inflation is seen rising further. Currently at 10.1 percent, the Bank of England is forecasting it will hit around 11 percent this year before starting to cool.

- Key figures around 2130 GMT -

New York - Dow: UP 0.1 percent at 33,747.86 points (close)

New York - S&P 500: UP 0.9 percent at 3,992.93 (close)

New York - Nasdaq: UP 1.9 percent at 11,323.33 (close)

London - FTSE 100: DOWN 0.8 percent at 7,318.04 points (close)

Frankfurt - DAX: UP 0.6 percent at 14,224.86 (close)

Paris - CAC 40: UP 0.6 percent at 6,594.62 (close)

EURO STOXX 50: UP 0.6 percent at 3,868.50 (close)

Tokyo - Nikkei 225: UP 3.0 percent at 28,263.57 (close)

Hong Kong - Hang Seng Index: UP 7.7 percent at 17,325.66 (close)

Shanghai - Composite: UP 1.7 percent at 3,087.29 (close)

Pound/dollar: UP at $1.1839 from $1.1724 on Thursday

Euro/dollar: UP at $1.0361 from $1.0219

Dollar/yen: DOWN at 138.7 yen from 140.67 yen

Euro/pound: UP at 87.49 pence from 87.10 pence

Brent North Sea crude: UP 2.5 percent at $95.99 per barrel

West Texas Intermediate: UP 2.9 percent at $88.96 per barrel

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Y.Bouchard--BTB