San Francisco Frontiers - Stock markets climb as US inflation rate drops

Wall Street's three main indices were all up in early deals at the end of a volatile week during which tech stocks and other sectors were rocked by disappointing earnings.

The Fed's preferred measure of US inflation -- the personal consumption expenditures (PCE) price index -- fell to 2.5 percent on an annual basis in June, from 2.6 percent in May.

The reading "should strengthen the likelihood of a September rate cut, with more to follow before year-end," said market analyst David Morrison at Trade Nation.

The core PCE price index that excludes volatile food and energy prices held steady at 2.6 percent.

The Fed has signalled that it wants to see inflation trending lower to its 2.0 percent target before cutting interest rates.

"To get a rate cut, investors and the Fed only needed to avoid a disastrously high PCE result today," said Bret Kenwell, US investment analyst at eToro online brokerage.

Attention will shift to Fed Chair Jerome Powell's comments after the central bank's meeting next week, "with the hope and expectation that he will set the stage for a rate cut in September," he added.

Briefing.com analyst Patrick O'Hare noted the market is now fully pricing in a 0.25-percentage-point cut in the Fed's policy rate.

The inflation data follows figures Thursday that showed the US economy expanded far more than expected in the second quarter, providing a much-needed boost to sentiment and eased concerns that it was slowing a little too much for comfort.

The improvement was largely consumer-led, even while US interest rates remain at two-decade highs and inflation is elevated.

European indices were higher in afternoon trading, while most leading Asian indices registered gains.

The Taipei stock market plunged more than three percent as traders returned from their imposed typhoon break, with chip makers leading the losses.

Market titan TSMC dived more than five percent, while ASE Technology plunged almost 10 percent.

Elsewhere Friday, the dollar traded mixed against main rivals and oil prices fell around one percent.

- Key figures around 1330 GMT -

New York - Dow: UP 0.7 percent at 40,195.03 points

New York - S&P 500: UP 0.6 percent at 5,431.88

New York - Nasdaq Composite: UP 0.7 percent at 17,309.46

London - FTSE 100: UP 0.9 percent at 8,258.91

Paris - CAC 40: UP 0.8 percent at 7,486.94

Frankfurt - DAX: UP 0.3 percent at 18,347.90

EURO STOXX 50: UP 0.7 percent at 4,843.46

Tokyo - Nikkei 225: DOWN 0.5 percent at 37,667.41 (close)

Hong Kong - Hang Seng Index: UP 0.1 percent at 17,021.31 (close)

Shanghai - Composite: UP 0.1 percent at 2,890.90 (close)

Euro/dollar: UP at $1.0862 from $1.0848 on Thursday

Pound/dollar: UP at $1.2866 from $1.2853

Dollar/yen: UP at 153.91 yen from 153.84 yen

Euro/pound: UP at 84.46 pence at 84.38 pence

West Texas Intermediate: DOWN 1.0 percent at $77.48 per barrel

Brent North Sea Crude: DOWN 1.0 percent at $81.54 per barrel

burs-rl/lth

B.Turner--SFF