* World stocks edge up, but set for weekly fall
* Dollar finishes strong week with more rises
* JP Morgan beats expectations with results
* Sterling finds strength on BoE comments
By Alistair Smout
LONDON, Oct 14 Global stocks and the dollar rose
on Friday, bouncing back from losses on the previous day, buoyed
by stronger-than-expected Chinese inflation data and encouraging
earnings from banks like JP Morgan.
The pound also found traction following recent weakness
after the governor of the Bank of England said he was "not
indifferent" to the foreign exchange rate.
September producer prices in China unexpectedly rose for the
first time in nearly five years, while consumer inflation also
beat expectations, easing some concerns about the health of the
world's second-biggest economy.
European shares tracked Asian markets higher. The
pan-European STOXX 600 was up 1.5 percent, helped by
rallies in mining and banking stocks stocks, while MSCI's
broadest index of Asia-Pacific shares outside Japan
ended up 0.6 percent.
E-mini S&P futures were up 0.4 percent, pointing to a
higher open on Wall Street.
Banks were boosted by strong results from JP Morgan,
which left it set to open at a 2 month high. Citigroup and
Wells Fargo were also poised to open higher after
However, equities were still set for their largest weekly
drop in over a month after a week which has seen expectations of
a Federal Reserve rate hike build and substantial volatility in
While the MSCI World index was up 0.3 percent on
Friday, it was down 1 percent for the week - its biggest weekly
drop since early September.
"Inflation has been quite a worry for some time, but the PPI
number today is a very nice change, and a much better number
than the negative numbers we had prior. So that gives us a bit
of confidence," said Veronika Pechlaner, European equity fund
manager at Ashburton, who said that the falls this week were not
a major cause for concern.
"The market felt exuberant heading into this week... We've
had a strong couple of months, so now a bit of normalisation is
The dollar index rose 0.3 percent to 97.834, and was
set for a weekly gain of 1.3 percent - its second straight week
of gains. It was down slightly from a seven month high touched
U.S. retail sales rebounded in September amid a surge in
motor vehicle purchases and a rise in discretionary spending,
pointing to sustained domestic demand that reinforces
expectations of an interest rate increase from the Federal
Reserve in December.
Boston Fed President Eric Rosengren endorsed the "very high"
odds that financial markets have priced in for a U.S. interest
rate hike at the end of the year. Federal Reserve Chair Janet
Yellen is also due to speak later on Friday.
The Fed's minutes from its September meeting prompted
investors to raise their bets on a December rate rise, and
fuelled the rally in the greenback this week.
The strength of both domestic and global growth will be a
key consideration for the Fed, demonstrated when weak Chinese
export numbers on Thursday not only hit global equities but also
stopped a rise in U.S. yields and halted the dollar's advance.
Even despite Friday's inflation data, Chinese stock ended
little changed on Friday as investors wrestled with the mixed
economic picture. The producer price increase will be good news
for profits and for Beijing as the government struggles to
reduce a mountain of corporate debt.
The greenback, which slid Thursday to 103.340 yen on the
Chinese trade data, gained 0.5 percent to 104.20 yen,
edging back towards a 2-1/2-month peak of 104.635. It was on
track to gain 1.2 percent on the week.
Having started the day with further falls, sterling
recovered all of the day's losses against the dollar on Friday
after Bank of England Governor Mark Carney said the bank was not
indifferent to the level of the pound, now down almost 20
percent since Britain voted to leave the European Union in June.
The pound had been pressurised by comments by European
Council President Donald Tusk, who will run the Brussels side of
Britain's negotiations on leaving the EU, that the bloc will not
offer London any softer terms than a "hard Brexit". Such a deal
would end Britain's membership of the single market and disrupt
access to the country's main trading partner.
The euro slipped 0.4 percent to $1.1013 after seeing
a 2-1/2-month low of $1.0985 on Thursday. The common currency
was en route for a 1.7 percent weekly loss. European bond yields
edged higher ahead of Yellen's speech.
Elsewhere in currencies, the Singapore dollar hit a
seven-month low after the economy unexpectedly contracted in the
third quarter, keeping alive easing prospects even though the
central bank stood pat on policy earlier in the day.
Thailand's stocks rose 4.6 percent and the baht
gained about 1 percent versus the dollar after the
government urged the country to remain calm after the death of
King Bhumibol Adulyadej.
"On the assumption that the succession goes smoothly, I
would assume that foreign investor inflows will continue," said
Andrew Bresler, director at Saxo Capital Markets based in
The Turkish lira edged down 0.1 percent, but was up from
Thursday's record low. The market is anxious over government
plans to push through an executive presidential system.
Crude oil extended gains after bouncing overnight on a U.S.
government report showing hefty draws in diesel and gasoline.
Brent crude was up 0.3 percent at $52.16 a barrel,
having risen to a one-year peak of $53.73 on Monday on
expectations for an OPEC output cut.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Editing by Toby Chopra)