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Hot US inflation leaves investors cold on equities while yen drops

Global stocks mostly fell Friday after the latest US inflation data added to worries that the Federal Reserve will enact more aggressive interest rate hikes.

Meanwhile, the dollar pushed higher against major currencies including the yen, which tumbled as the incoming head of Japan's central bank showed no intention of altering the policy of avoiding interest rate rises.

The Federal Reserve's preferred gauge of inflation, the personal consumption expenditures price index, rose 5.4 percent last month from January 2022.

The report is the latest indicator to suggest the US central bank still faces significant challenges in addressing sticky pricing pressure.

"It's hard to suggest that this data is not concerning," said Tom Cahill of Ventura Wealth Management, who questioned whether the Fed's actions will "drive the economy into recession."

The broad-based S&P 500 shed just over one percent, bringing its losses for the week to nearly three percent.

The dollar was broadly higher as markets bet on more Fed rate hikes.

"Inflation accelerated more than expected," said Joseph Manimbo, senior analyst at Convera.

A strong consumer, coupled with "inflation's jump in the wrong direction, adds credence to the view of the Fed having to raise rates beyond the first half of the year," he added.

European stock indices were also pulled lower by the US inflation data, while Tokyo equities rose solidly as the Bank of Japan's incoming governor Kazuo Ueda said its longstanding monetary easing policies were "appropriate."

Under current boss Haruhiko Kuroda, the bank has unleashed a raft of extraordinary ultra-loose policies -- from a negative interest rate to spending vast sums on government bonds -- in a bid to boost the sluggish economy.

The comments by Ueda, who takes the helm in April, followed data showing Japanese inflation at a four-decade high of 4.2 percent.

The figure was fueled in part by higher energy bills, while the contrast between Fed tightening and the BoJ's easing has generally driven the yen down against the dollar, making foreign goods more expensive in Japan.

The BoJ has so far declined to join other central banks in hiking borrowing costs to counter rapidly rising prices of goods and services.

Among individual companies, Boeing slumped nearly five percent after it suspended deliveries of the 787 Dreamliner again.

The latest pause is a disappointment for the aerospace giant after it resumed deliveries of the jet in August, following a halt of more than a year.

- Key figures around 2130 GMT -

New York - Dow: DOWN 1.0 percent at 32,816.92 (close)

New York - S&P 500: DOWN 1.1 percent at 3,970.04 (close)

New York - Nasdaq: DOWN 1.7 percent at 11,394.94 (close)

London - FTSE 100: DOWN 0.4 percent at 7,878.66 (close)

Frankfurt - DAX: DOWN 1.7 percent at 15,209.74 (close)

Paris - CAC 40: DOWN 1.8 percent at 7,187.27 (close)

EURO STOXX 50: DOWN 1.9 percent at 4,178.82 (close)

Tokyo - Nikkei 225: UP 1.3 percent at 27,453.48 (close)

Hong Kong - Hang Seng Index: DOWN 1.7 percent at 20,010.04 (close)

Shanghai - Composite: DOWN 0.6 percent at 3,267.16 (close)

Dollar/yen: UP at 136.46 yen from 134.70 yen on Thursday

Euro/dollar: DOWN at $1.0552 from $1.0596

Pound/dollar: DOWN at $1.1938 from $1.2013

Euro/pound: UP at 88.30 pence from 88.18 pence

Brent North Sea crude: UP 1.2 percent at $83.16 per barrel

West Texas Intermediate: UP 1.2 percent at $76.32 per barrel