The UK's blue-chip stock index rose to 20-month highs as China-exposed miners listed in London bounced on relief that property developer China Evergrande averted a default.
European shares advanced after Goldman Sachs said regional earnings have been resilient to supply chain snags, a message that echoed on Wall Street as investors viewed the impact on rising prices as temporary but positive for corporate profits.
"Inflation in and of itself isn't always a bad thing for the equity market," Don Townswick, director of equity strategies at institutional asset manager Conning. "Typically tightening happens when the economy is doing really well, so merely the prospect of some higher interest rates isn't a problem."
Rising producer prices historically have signaled higher operating margins, which are not reflected in next year's earnings estimates, according to Andrew Slimmon, a managing director at Morgan Stanley Investment Management.
"We think earnings revisions for next year will have to go back up again - a positive for 2022," Slimmon said in a note.
The dollar index, which gauges the currency against six peers including the yen and euro, rose further after posting on Wednesday its biggest daily jump since March following a higher-than-expected rise in U.S. consumer price data. [/FRX]
The CPI index posted its biggest monthly gain in four months to lift the annual increase in inflation to 6.2%, the strongest year-on-year advance since November 1990.
The dollar pushed the euro below $1.15, leaving the next major chart support level down at $1.12. European stocks moved higher, sensing the potential for a competitive boost.
MSCI's all-country world index closed up 0.07% as Wall Street pared gains at the close. The broad STOXX Europe 600 index rose 0.32% to end at a record closing high.
On Wall Street, the Dow Jones Industrial Average slid 0.44%, while the Nasdaq Composite advanced 0.52% and the S&P 500 added 0.06%, almost turning negative at the bell.
(GRAPHIC-U.S. 'real' yields now lower than those in emerging markets:
Chinese and Japanese stocks also rose. China's markets were supported by property giant Evergrande avoiding default again and hopes Beijing would give the broader sector support. The Nikkei was helped by the weaker yen, which aids exporters. [.T][.SS]
Chinese blue chips rallied 1.6%. Evergrande jumped nearly 7%. Japan's Nikkei ended up 0.6% while the yen weakened as far as 114.15 per dollar from as strong as 112.73 earlier this week.
Tesla slid 0.4% a day after clawing back heavy losses earlier this week following regulatory filings that showed founder and Chief Executive Elon Musk had sold about $5 billion in the past few days. Tesla is down 13% for the week.
Walt Disney fell 7.1% to lead declines among Dow components and the S&P 500, as it reported the smallest rise in Disney+ subscriptions since the service's launch and posted downbeat profits at its theme parks. [.N]
Gold prices neared five-month highs they touched the previous session as investors have sought inflation hedges. Gold jumped to a five-month high of $1,868.20 overnight before easing a bit on Thursday.
U.S. gold futures for December delivery settled 0.8% higher at $1,863.90 per ounce.
Oil rose above $83 a barrel before easing a bit as the market grappled with a stronger dollar and concerns about faster U.S. inflation after the Organization of the Petroleum Exporting Countries cut its 2021 oil demand forecast due to high prices.
Brent crude settled up 23 cents at $82.87 a barrel. U.S. crude rose 25 cents to settle at $81.59 a barrel.
Bitcoin hit a fresh record at $69,000 before dipping back to trade about 0.19% higher around $65,046.30.
The U.S. Treasury market was closed in observance of Veterans Day, or Armistice Day elsewhere.
(Reporting by Herbert Lash, additional reporting by Marc Jones in London, Kevin Buckland in Tokyo, Editing by David Gregorio and Lisa Shumaker)
By Herbert Lash and Marc Jones