World shares mostly higher after new signs inflation cooling

BANGKOK – Shares opened higher in Europe after a mixed day in Asia on Friday following another encouraging report about U.S. inflation.

The United Kingdom reported its economy contracted 0.1% in the last quarter as families cut back on spending to cope with price increases. The decline was better than most forecasts.

“So basically, it’s bad but not as bad as feared and that may be as good as it gets for a while,” Craig Erlam of Oanda said in a report. He noted that household spending would likely weaken further as Britain braces for much higher energy prices as a result of disruptions to supplies due to the war in Ukraine.

Britain’s FTSE 100 gained 0.6% to 7,507.81 and the DAX in Germany also rose 0.6%, to 13,775.16. In Paris, the CAC 40 added 0.5% to 6,574.96.

The futures for the S&P 500 and Dow Jones Industrial Average were up 0.5%. On Thursday, the S&P 500 lost 0.1%, the Dow edged 0.1% higher and the Nasdaq gave up 0.6%. The three indexes were on pace for a weekly gain.

The report Thursday showing that U.S. inflation at the wholesale level slowed more than economists expected last month came a day after a cooler-than-expected reading on inflation at the consumer level. Such data have raised hopes among investors that decades-high inflation may be close to a peak and that the Federal Reserve will be less aggressive about raising interest rates than feared.

However, inflation is still painfully high and the economy has given false signals before that relief was on the way only for investors to have the rug pulled out from underneath them. Some Fed officials also made comments after Wednesday’s inflation report suggesting their battle against rising prices is far from over.

In Asian trading, Tokyo’s Nikkei 225 added 2.6% to 28,546.98. Seoul’s Kospi edged 0.2% higher to 2,527.94 and the Hang Seng in Hong Kong picked up 0.4% to 20,175.62.

Sydney’s S&P/ASX 200 shed 0.5% to 7,032.50 while the Shanghai Composite index slipped 0.2% to 3,276.89.

Enough hope for a peak in inflation and Fed aggressiveness has built that the S&P 500 has roughly halved its losses from earlier in the year. It’s up more than 14% from its bottom in mid-June.

Worries about a possible recession still loom over the market, as the Federal Reserve continues to raise interest rates to fight inflation.

A report on Thursday showed fewer U.S. workers filed for jobless claims last week than expected, a potentially encouraging sign about layoffs. But it was nevertheless the highest number since November.

Traders are now betting on the Fed to raise overnight interest rates by half a percentage point at its meeting next month, down from Fed’s last two increases of 0.75 percentage points. Even if the Fed can manage to slow the economy enough to stamp out inflation without causing a recession, higher interest rates pull downward on prices for all kinds of investments regardless.

In other trading Friday, U.S. benchmark crude oil reversed early losses, gaining 11 cents to $94.45 per barrel in electronic trading on the New York Mercantile Exchange. It jumped $2.41 to $94.34 per barrel on Thursday.

Brent crude oil, the basis for pricing for international trading, advanced 42 cents to $99.98 per barrel.

The U.S. dollar rose to 133.33 Japanese yen from 133.03 yen. The euro fell to $1.0294 from $1.0322.