LONDON: US and European stocks mostly rose Thursday on optimism that US inflation may be finally peaking after soaring to its highest level in decades.
US consumer prices rose seven percent on-year in December, the fastest rate since 1982, as supply snarls and energy costs were compounded by surging demand from Americans returning to normal life.
However, Wednesday's highly-anticipated reading was in line with expectations and analysts pointed out that the increase from the previous month had slowed and was below forecasts.
The data "brought forward the idea that this could be the point we see a peak in the inflation levels and light at the end of the long and dark inflation tunnel," said Ipek Ozkardeskaya, senior analyst at Swissquote.
The London and Frankfurt stock exchanges reversed falls from earlier in the day to trade higher in the afternoon but Paris fell. Wall Street stocks rose in early deals.
A new batch of data on Thursday showed wholesale prices for US goods and services eased somewhat in December, but still jumped 9.7 percent for the year.
New claims for US unemployment benefits rose last week, in a potential indication of the drag from the latest Covid-19 surge.
Interest rates and inflation "will keep investors on their toes", said market analyst Craig Erlam, who added that "underlying anxiety in the markets... could make for some volatile price action for the foreseeable future".
"It does seem that investors are on the edge of what they will tolerate and it won't take much to push them over the edge," he said.
There remains much debate on how many times the Federal Reserve will hike US interest rates to fight strong inflation and when it will begin to cut back on the holdings of bonds it purchased as part of its vast stimulus programme.
"March has all but made a rate (hike) by the Fed a foregone conclusion. June is not far behind either," predicted Jack Janasiewicz at Natixis Investment Managers Solutions.
Traders are fearful that markets will not have an easy ride this year as the Fed removes the massive support that has helped drive a two-year rally and saw the economy through the pandemic.
"There is a real risk that high levels of inflation could hurt consumer demand, which could weigh on economic activity, especially with Omicron spreading like wildfires," said ThinkMarkets analyst Fawad Razaqzada.
"This in turn may mean the Fed will slow down or pause its hiking later this year."
Elsewhere, oil prices had mixed results following gains Wednesday on data showing US crude stockpiles last week fell to the lowest level since 2018, lifting hopes for demand in the world's top economy.
Oil prices shrug off Omicron to reach two-month high
"OPEC being unable to hit output targets at a time when demand remains strong is ultimately keeping prices elevated and will continue to do so," said Erlam.
Key figures around 1430 GMT
London - FTSE 100: UP 0.2 percent at 7,563.67 points
Frankfurt - DAX: UP 0.4 percent at 16,067.13
Paris - CAC 40: DOWN 0.2 percent at 7,219.71
EURO STOXX 50: UP 0.3 percent at 4,329.77
Tokyo - Nikkei 225: DOWN 1.0 percent at 28,517.94 (close)
Hong Kong - Hang Seng Index: UP 0.1 percent at 24,429.77 (close)
Shanghai - Composite: DOWN 1.2 percent at 3,555.26 (close)
New York - DOW: UP 0.1 percent at 36,290.32 (close)
Euro/dollar: UP at $1.1474 from $1.1463 midday Thursday
Pound/dollar: DOWN at $1.3738 from $1.3740
Euro/pound: UP at 83.51 pence from 83.42 pence
Dollar/yen: DOWN at 114.22 yen from 114.48 yen
Brent North Sea crude: FLAT at $84.69 per barrel
West Texas Intermediate: DOWN 0.3 percent at $82.43 per barrel
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