Stocks mixed after inflation scare

LONDON — Stock markets diverged on Thursday as traders digested stubborn inflation concerns, a mixed economic growth picture and a positive update regarding embattled Chinese property group Evergrande.

Europe's main equity indices edged higher in afternoon trading after gains across Asia.

Wall Street opened mixed as the Dow Jones Industrial Average fell while the S&P 500 and Nasdaq rose.

The major US markets had closed lower for a second straight day on Wednesday as data showed the US consumer price index hit a 31-year high last month, putting fresh pressure on the US Federal Reserve to act to prevent inflation from running out of control.

Fed officials have insisted that the jump in inflation will be temporary as the global economy slowly returns to a semblance of normality next year.

Thursday's gains on the stock markets "would suggest investors are not too convinced the Fed will change course at its next policy meeting in December, even though inflation signals have really tested the central bank's 'transitory' term," said ThinkMarkets analyst Fawad Razaqzada.

"The market may perhaps give the Fed that extra bit of doubt just in case we might have seen peak inflation," Razaqzada said.

The prospect of a potential rate hike helped the dollar rise against other major currencies.

Oil prices rebounded after dropping over inflation concerns.

OPEC lowered its forecast for growth in world oil demand in 2021 due to weaker demand in major consumers China and India, and soaring energy prices.

While central bankers have sought to ease concerns over inflation, observers said the pain is far from over.

"We're going to see the inflation picture get worse before it gets better," said Sarah House at Wells Fargo & Co.

The growth outlook was also in focus as Brussels on Thursday raised its forecast for eurozone output this year.

At the same time, official data showed Britain's economic recovery slowed sharply in the third quarter on supply constraints as countries reopen after pandemic lockdowns.

London's FTSE 100 index, however, was up by 0.5 per cent in afternoon trading. 

Back in Asia, Bloomberg News reported that Evergrande had again stumped up the cash for interest on bonds, slightly easing concerns about its imminent collapse and potential contagion outside China.