Europe extended a global share market rebound on Friday, following Asian and U.S. stock indexes higher after better U.S. data helped allay fears about global growth and sent world stocks to two-month highs.
The pan-European FTSEurofirst 300 .FTEU3 rose 0.7 percent, up for a second straight session to recoup losses made earlier in the week after weak data from China.
That helped the MSCI World Index .WORLD to its highest level since August 21. Up 6 percent so far in October, it is set for its best month since 2011.
Asian and European shares followed Wall Street higher data showed after new applications for unemployment benefits fell back to a 42-year low last week. That suggested the labor market remained strong even though recent jobs data releases have sent mixed signals.
Core inflation data also showed some signs that price pressures in the economy were beginning to build up again, although the Fed has been in no rush to raise rates, expressing concerns that the slowing global economy, particularly in China, might pose a threat to the U.S. economic outlook.
"(The) report should be reassuring to markets which have been on edge over global disinflation risks," strategists at BNP Paribas said in a note.
"It helps keep the possibility of a (interest rate) move at the end of this year alive, although our central scenario remains for a delay until at least March 2016."
Rekindled rate-hike expectations lifted the dollar. The dollar index .DXY, which values the greenback against a basket of six major counterparts, was up 0.2 percent at 94.535, but still on track for a weekly loss of about 0.3 percent.
The greenback also gained against the yen, rising 0.3 percent to buy 119.11 yen JPY=after pulling away from a 7-week trough of 118.065 struck overnight. The U.S. currency was still poised to lose 0.9 percent this week.
The data and strength of the dollar sent gold lower, retreating from a 3-1/2-month high.
There were signs of stabilization in China, with Chinese stocks rising to seven-week highs. Main indexes registered their best weekly performance in four-and-a-half months after data showed Chinese loans surged in September.
"The recovery seems to be resuming again and, I think, has further to go as the risks regarding China seem to be receding," said Shane Oliver, head of investment strategy at AMP Capital in Sydney.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged 0.1 percent higher, on track to show a rise of 1.3 percent for the week.
Japan's Nikkei stock index .N225 was up 1.1 percent, but still poised for a 0.8 percent decline for the week.
Investors remained cautious ahead of China's latest economic growth data scheduled to be released on Monday.
Growth in the world's second-largest economy is expected to slow to 6.5 percent in the third quarter, falling below 7 percent for the first time since the global financial crisis.
Markets were also awaiting September euro zone inflation data on Friday, with expectations that an early estimate of prices contracting 0.1 percent will be confirmed.
The latest survey of over 60 economists showed eurozone inflation was expected to average 0.1 percent this year, rise to 1.1 percent in 2016 and further to 1.6 percent in 2017 -- still below the European Central Bank's near 2 percent target.
The euro was steady at $1.1377 EUR=, after sliding from a 7-week peak of $1.1495 scaled the previous day after ECB governing council member Ewald Nowotny said it was "obvious" the central bank must seek more ways to stimulate the euro zone economy. The common currency was on track to end the week effectively flat.
Spanish government bond yields fell on Friday as expectations mounted that Moody's is set to upgrade the country's credit rating.
London copper climbed to near a one-month peak on Friday and was set to log a third weekly advance, as incremental cuts to mine supply and a revival in China demand underpinned a modest rise in prices.
Supply concerns also saw oil prices snap a week-long decline as investors bet falling U.S. production would cut a global surplus, while the country's gasoline and distillate inventories dropped more than expected.
U.S. crude CLc1 was up 1.1 percent at $46.90 a barrel, after shedding 0.6 percent on Thursday. Brent LCOc1 added 1 percent to $50.20.
(Reporting by Alistair Smout; Editing by Janet Lawrence)
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