San Francisco Frontiers - Stocks rattled by US inflation surge

Wall Street, which finished sharply lower Thursday on the inflation data, opened modestly higher as concerns about the Fed's possible response faded somewhat.

The 7.5-percent jump in US consumer prices last month was the fastest in 40 years and reinforced fears that the central bank is falling behind the curve in keeping it under control.

Sentiment was also hit by remarks from Fed official James Bullard, who said he wanted to see interest rates lifted one percentage point by the start of July.

The St Louis Fed boss said he was in favour of a 50 basis point lift next month -- double the usual rise and the first since 2000 -- and two more after that.

"I'd like to see 100 basis points in the bag by July 1," Bullard, who has a vote on policy this year, told Bloomberg News. "I was already more hawkish but I have pulled up dramatically what I think the committee should do."

He added: "I do not think it is shock and awe.

"I think it is a sensible response to a surprise inflationary shock that we got during 2021 that we did not expect."

Bullard also said he was open to a very rare announcement of rate hikes between meetings, which further rattled traders who fretted about a move before March, while calling for the quick reduction of the bank's bond holdings that have helped keep rates subdued.

US Treasury yields -- a guide to future borrowing costs -- have risen above two percent and analysts are predicting up to seven Fed rate hikes this year.

"The embers are still smoldering this morning, but a Bloomberg report that discusses some Fed members pushing back on the idea of a 50 basis points hike at the March meeting, or some type of inter-meeting rate hike, has poured some cold water on the rate-hike fire for now," said Patrick O'Hare at Briefing.com

In Europe, London equities slid as investors set aside rebounding 2021 economic growth to focus on shrinking December activity in the wake of the Omicron Covid variant.

The UK economy grew by a record 7.5 percent last year to rebound from the pandemic crash, but shrank by a modest 0.2 percent in the final month, official data showed.

In the eurozone, Frankfurt and Paris stocks banked lower, mirroring Asia after overnight Wall Street losses.

Separately on Friday, the International Energy Agency ramped up its 2022 demand outlook to 100.6 million barrels of crude oil per day, an increase of 3.2 million, as governments further ease Covid restrictions.

"Oil prices are rallying once more as the IEA raised forecasts for demand this year and confirmed that OPEC+ missed its output targets again in January and by an even wider margin of 900,000 barrels," said Craig Erlam at trading platform OANDA.

- Key figures around 1430 GMT -

London - FTSE 100: DOWN 0.6 percent at 7,626.33 points

Frankfurt - DAX: DOWN 0.2 percent at 15,463.56

Paris - CAC 40: DOWN 0.9 percent at 7,037.59

EURO STOXX 50: DOWN 0.7 percent at 4,168.92

New York - Dow: UP 0.2 percent at 35,302.35

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 24,906.66 (close)

Shanghai - Composite: DOWN 0.7 percent at 3,462.95 (close)

Tokyo - Nikkei 225: Closed for a holiday

Euro/dollar: DOWN at $1.1397 from $1.1428 late Thursday

Pound/dollar: UP at $1.3573 from $1.3557

Euro/pound: DOWN at 83.93 pence from 84.29 pence

Dollar/yen: DOWN at 115.88 yen from 116.01 yen

Brent North Sea crude: UP 1.0 percent at $92.32 per barrel

West Texas Intermediate: UP 1.2 percent at $90.93 per barrel

burs-rl/lth

A.Smith--SFF