By Lawrence Delevingne
(Reuters) -Global shares struggled on Friday despite a lift from technology giants, while benchmark Treasury yields and the dollar saw little change as data confirmed U.S. inflation remained high, but in line with forecasts.
Underlying inflation picked up last month, largely driven by housing costs, a U.S. Commerce Department report showed. But with spending seen cooling off in early 2024, most economists believe the Federal Reserve is done raising interest rates, though risks of a rate hike remain.
"This report will not likely change the Fed's view that inflation will slow in the coming months as demand slows," said Jeffrey Roach, chief economist at LPL Financial (NASDAQ:LPLA) in Charlotte, North Carolina, in an email.
The Dow Jones Industrial Average fell 1.12%, the S&P 500 lost 0.48% and the Nasdaq Composite added 0.38%.
Shares of Amazon.com (NASDAQ:AMZN) advanced nearly 7% after beating sales estimates, while Intel (NASDAQ:INTC) jumped more than 9% after the chipmaker signaled personal computer market rebounding from a quarters-long slump. Chevron (NYSE:CVX) fell 6.7% after the oil major reported a drop in third-quarter profit.
MSCI's all-country equity gauge fell 0.22%. It had previously gained after news on Thursday that the U.S. economy expanded at its fastest rate for almost two years in the third quarter, while the European Central Bank (ECB) also held interest rates steady.
European shares dipped to near seven-month lows on Friday and clocked a second week of losses, with France's blue-chip index leading the way down after Sanofi (NASDAQ:SNY) scrapped its 2025 profit forecast. MSCI's broadest index of Asia-Pacific shares outside Japan closed about 1% higher after hitting a fresh 11-month low on Thursday.
SOFT LANDING?
The yield on the 10-year U.S. Treasury, which moves inversely to the price of the debt security and functions as a benchmark for global borrowing costs, was little changed at 4.837% after crossing 5% earlier in the week.
Bank of America strategists said that despite unexpectedly strong third quarter U.S. economic growth, a slowdown in the fourth still made "a soft landing more likely than no landing."
Globally, "markets continue to hope for disinflation to continue smoothly, but don't take disinflation for granted," they wrote in a note on Friday.
The Fed is widely expected to keep its funds rate in a range of 5.25%-5.5% next week, although Chair Jay Powell has said a strong economy and tight jobs market could warrant more rises.
The ECB held its deposit rate at a record high of 4% on Thursday, although President Christine Lagarde signaled after the decision that further monetary tightening was possible.
Oil prices rose as investors priced in fears of an escalation of conflict in the Middle East which could disrupt oil supplies. Israeli air and ground forces are stepping up operations in the Gaza Strip, Israel's chief military spokesperson said on Friday, amid reports of heavy bombing of the besieged enclave.
U.S. crude settled up 2.33% to $85.15 per barrel and Brent was at $90.12, up 2.49% on the day.
Spot gold added 1.1% to $2,005.78 an ounce.
CURRENCY MOVES
In currency markets, the euro was steady at 1.056 per dollar, now down almost 14% in the last three months.
Thanks to rate rises and a robust U.S. economy, the index that measures the dollar's strength against competing currencies has risen almost 5% in three months and was on track for a weekly gain, even as was little changed on the day.
The yen hit a new one-year low of 150.77 per dollar overnight and was last at 149.59. That put it not far off the three-decade low of 151.94 touched in October last year that led Japanese authorities to intervene to prop it up.