Volkswacht Bodensee - Stock markets drop on prospect of more rate hikes

Official data Thursday that showed US inflation rising less than expected in July failed to stop bets on the Federal Reserve raising borrowing costs again before the end of 2023.

Across the Atlantic, better-than-expected UK growth data Friday increased the likelihood of more BoE tightening, boosting the pound.

Gross domestic product grew 0.2 percent in the April to June period thanks to strong output in June and despite inflation remaining high, the Office for National Statistics (ONS) said in a statement.

"Today's GDP data helps build on the idea that the UK could be on track for a soft-landing akin to that currently being seen in the US," Joshua Mahony, chief market analyst at Scope Markets, said.

"However, that soft-landing narrative also brings with it the potential for a more protracted period of tightening, with the Bank of England under no pressure to ease off on its current path of higher interest rates."

In the United States, consumer prices rose last month more than in June but by less than forecast, giving the Fed room to take a lighter touch with monetary policy after more than a year of rate hikes.

While there is a broad expectation that policymakers will hold off on lifting borrowing costs at next month's meeting, analysts said there was still a chance they could do so soon after.

"The (inflation) data... keeps alive the possibility of a further possible hike later in the year given the tightness in the labour market," said National Australia Bank's Tapas Strickland.

In Asian stock market trading, Hong Kong extended the week's losses Friday, even as e-commerce titan Alibaba surged on a forecast-busting rise in revenue.

Tokyo was closed for a public holiday.

Oil prices climbed as the International Energy Agency hiked its forecast for global oil demand growth this year despite weakness in the Chinese economy.

Investors were keeping tabs on China, also over hopes that its leaders would provide some concrete measures to boost the world's second-biggest economy.

Figures this week on trade and inflation reinforced the view that China's post-Covid recovery had run out of steam.

- Key figures around 1045 GMT -

London - FTSE 100: DOWN 1.0 percent at 7,536.42 points

Frankfurt - DAX: DOWN 0.4 percent at 15,926.94

Paris - CAC 40: DOWN 0.7 percent at 7,378.77

EURO STOXX 50: DOWN 0.8 percent at 4,348.01

Hong Kong - Hang Seng Index: DOWN 0.9 percent at 19,075.19 (close)

Shanghai - Composite: DOWN 2.0 percent at 3,189.25 (close)

Tokyo - Nikkei 225: Closed for a holiday

New York - Dow: UP 0.2 percent at 35,176.15 (close)

Euro/dollar: UP at $1.0984 from $1.0983 on Thursday

Pound/dollar: UP at $1.2715 from $1.2676

Euro/pound: DOWN at 86.45 from 86.62 pence

Dollar/yen: DOWN at 144.56 yen from 144.77 yen

Brent North Sea crude: UP 0.3 percent at $86.66 per barrel

West Texas Intermediate: UP 0.3 percent at $83.04 per barrel

L.Dubois--BTB