Volkswacht Bodensee - Stocks climb, oil jumps

European stocks closed solidly higher after official data showed eurozone growth holding up in the face of soaring inflation.

Frankfurt rose 1.5 percent and Paris climbed 1.7 percent.

The EU's official data agency said the 19-country eurozone's economy grew by 0.7 percent in the second quarter.

But the euro failed to gain much traction, which analysts put down to the other piece of data released Friday: inflation rose to a new record of 8.9 percent in July.

"This means that consumers are facing even more pressure on their disposable incomes, which should translate into lower spending and thus weaker economic activity," said Fawad Razaqzada at City Index and FOREX.com.

Meanwhile, Wall Street continued to add to a rally that began Wednesday on the belief that the US Federal Reserve will now slow its pace of interest rate hikes, after hiking them by three-quarters of a percentage point.

The belief even overcame data Thursday showing the US economy shrank by 0.9 percent in the period from April to June, and Friday's data that prices are continuing to rise faster than consumers' income.

That followed a 1.6 percent contraction in the preceding three months, meaning that the world's largest economy had met the technical definition of a recession of two consecutive quarters of contraction.

But the reading was taken as a sign of good news, since it could give the Fed room to take its foot off the pedal.

Treasury yields -- considered a barometer of future interest rates -- eased, while stocks surged higher.

Companies are in the midst of reporting quarterly earnings, and many are showing the strains from inflation and disrupted supply chains.

But the fact that earnings have been broadly better than investors feared has created positive sentiment.

Market analyst Michael Hewson at CMC Markets said investors are "taking comfort from earnings numbers that have by and large been better than expected, despite concerns about the growth outlook."

And while debate rages over whether the US is really in recession -- the formal determination is made by the National Bureau of Economic Research -- the consensus is that the economy is struggling.

"The more important point is that the economy has quickly lost steam in the face of four-decade high inflation, rapidly rising borrowing costs, and a general tightening in financial conditions," said Sal Guatieri, of BMO Capital Markets.

China is also struggling, hit by Covid-induced lockdowns in major cities including Shanghai and Beijing that have hammered all sectors and supply chains.

But oil traders didn't focus Friday on the risk of recession destroying demand for crude, choosing instead to focus on supply concerns.

"Oil prices are rising again amid reports that OPEC+ will leave output targets unchanged next month when it meets on Wednesday," said Craig Erlam at OANDA trading platform.

The main US contract, WTI, surged by more than five percent to rise back above $100 per barrel.

- Key figures at around 1530 GMT -

New York - Dow: UP 0.2 percent at 32,582.21 points

EURO STOXX 50: UP 1.5 percent at 3,708.10

London - FTSE 100: UP 1.1 percent at 7,423.43 (close)

Frankfurt - DAX: UP 1.5 percent at 13,484.05 (close)

Paris - CAC 40: UP 1.7 percent at 6,448.50 (close)

Tokyo - Nikkei 225: DOWN 0.1 percent at 27,801.64 (close)

Hong Kong - Hang Seng Index: DOWN 2.3 percent at 20,156.51 (close)

Shanghai - Composite: DOWN 0.9 percent at 3,253.24 (close)

Euro/dollar: UP at $1.0201 from $1.0197 Thursday

Pound/dollar: DOWN at $1.2171 from $1.2177

Euro/pound: UP at 83.81 pence from 83.70 pence

Dollar/yen: DOWN at 133.41 yen from 134.25 yen

Brent North Sea crude: UP 3.0 percent at $110.33 per barrel

West Texas Intermediate: UP 4.8 percent at $101.08 per barrel

burs-rl/pvh

E.Schubert--BTB