World stocks diverge as traders close out tough week

Stock markets were mixed Friday after a painful few days as traders tracked Delta variant developments, Chinese regulatory crackdowns, disappointing economic data and brewing geopolitical tensions.

Asia's main indices closed out the week higher while Europe was lower after another tepid overnight lead from Wall Street, which was pulled between better-than-expected US retail sales and an above-forecast reading on jobless claims.

On foreign exchange, the euro rose against the dollar and British pound following a report in the Financial Times that the European Central Bank was on course to hike eurozone interest rates in 2023, an outlook later denied by the ECB.

Rising prices as economies emerge from pandemic lockdowns has triggered expectations that central banks will both taper their huge financial stimulus packages and raise interest rates sooner than expected.

The main focus for investors is now the US Federal Reserve's policy meeting next week and whether it will signal how much and how long it will dial back the vast bond-buying programme that has been key to a global economic and equity rally for more than a year.

The Bank of England also meets next week amid annual UK inflation at the highest level in more than nine years.

The Fed will "probably admit they're going to taper, but maybe not taper as much as everybody thought", markets strategist Louis Navellier said.

Eyes are also on the progress of US President Joe Biden's multi-trillion-dollar infrastructure and social spending plans, which are struggling through Congress.

At the same time, lawmakers have yet to agree on raising the debt ceiling -- bring the possibility of a catastrophic US default into play.

That all comes against the backdrop of the highly transmissible Delta Covid mutation, which has sent infections around the world surging and forced several countries to reimpose lockdowns and other containment measures.

Among them is China, where a new outbreak has spooked traders just weeks after officials had appeared to have brought another under control.

The new flare-up has led to concerns that the world's number two economy and key driver of world growth, which was already stuttering, could suffer

further.