Global stocks rise in week dominated by inflation fears

US major benchmarks all gained by lunchtime in New York, paring their losses for the week and taking their cue from Europe, where the FTSE was notable in bucking the bullish Friday feeling.

The euro dropped to a 15-month low versus the dollar before steadying, with the US currency benefiting from expectations the under-scrutiny Federal Reserve will begin a series of rate rises to stamp out surging inflation in the world's biggest economy.

"Inflation is running super-hot," said Neil Wilson, chief markets analyst at Markets.com, pointing to multi-decade highs of key gauges in the US, Japan and China.

Friday saw yet more evidence with German wholesale prices jumping 15.2 percent year-on-year in October, the fastest clip since March 1974 and an acceleration from the previous two months, he said.

"Yet investors don’t seem that bothered," Wilson said. "Ultimately, the market remains fairly comfortable with fundamentals" and with central banks keeping rates -- and with them, bond yields -- artificially low, "equities remain the only game in town".

While inflation headwinds are clearly spooking some, persistently low interest rates are leaving yield-hungry investors with few options other than to keep their faith in stocks -- a scenario analysts dub TINA -- there is no alternative.

"Equities can’t continue to hold firm against this backdrop but in a TINA world, stranger things have happened," said Oanda analyst Craig Erlam, pointing to surging gold prices and the strengthening dollar.

Gold futures in New York were little changed at a five-month high of $1,864.3 per ounce as the precious metal's traditional value as protection against inflation meant "investors turned to an old friend in time of need", Erlam said.

Markets are looking to see if the global inflation spurt will ease as supply chain disruptions and wage hikes normalise and businesses recover from their pandemic hit.

Toyota Motor is making up for lost production from supply shortages as Japanese factories return to full capacity for the first time in seven months, according to media reports, while Lufthansa announced an early payback of its bailout from the German government as demand rebounds.

A better-than-expected earnings season as companies passed on their rising costs to customers has given confidence that the economic recovery remains on track.

"What we have seen this week is only profit taking, the recent retracement could be the opportunity to bag some bargains," said Naeem Aslam, an analyst at AvaTrade.