World markets still buoyed by US inflation data

Stock markets rose on Friday, still riding the positive US inflation data from earlier this week as investors mull the size of the next interest rate move by the US Federal Reserve.

The Dow, S&P 500 and Nasdaq all piled on at least one percent, adding to the weekly gains for all three indices.

In Europe, London's benchmark FTSE 100 index ended the day 0.5 percent higher, Frankfurt's DAX gained 0.7 percent and Paris's CAC 40 index added 0.1 percent.

"This week has been all about the inflation data and, frankly, it could be the dominant force in the markets now right up until the Jackson Hole symposium," said OANDA analyst Craig Erlam, referring to an upcoming meeting of central bankers from around the world at the end of August.

"The fact that inflation not only decelerated in the US, but at a faster pace than the consensus forecasts was a double win and risk assets are feeling the benefit," Erlam said.

But whether the improved data hearkens a pivot in Federal Reserve policy anytime soon remains an open question.

The markets have been concerned that, after two consecutive Fed increases in borrowing costs of three-quarters of a percentage point, further hikes of a similar magnitude could choke off economic recovery. 

Fed officials have thus far lined up to try to defuse speculation that the cycle of monetary policy tightening could be coming to an end anytime soon.

Cresset Asset Management's Jack Ablin attributed the gains to a "sentiment shift" that he cautioned may be excessive given the limited evidence thus far.