Stock market expects a third week of gains after technical gains and dollar declines

Global equities got a tech boost to help Friday's third straight week of gains despite rising inflation worries, while the dollar fell and oil prices rebounded from their lows.

According to MSCI, global equities rose 0.1%, up 1.4% for the week and just 0.8% below their all-time highs. All major European markets rose, with the biggest, the British FTSE 100, adding 0.4%.

This followed gains in Asia, where Japan's Nikkei rose 0.3%, led by the technology sector, and equity bulls were also comforted by news that China Evergrande Group, a major debt-ridden Chinese property company, made an unexpected interest payment, preventing default for the moment.

The risk tone emerged despite growing investor concern that persistent inflation could force central banks to tighten monetary policy at a time when global economic growth remains fragile.

Data on Friday showed eurozone inflation expectations are at their highest level in years amid a series of warnings from companies including Nestle, ABB and Unilever.

Germany's 10-year break-even inflation rate, which is the difference in yield between a nominal bond and its inflation-indexed counterpart, rose to around 1.81%, the highest since April 2013.

Rising prices held back eurozone growth in October and could set the stage for a tough European Central Bank meeting next week, said Neil Birrell, investment director at Premier Miton.

"The ECB will meet next week, it has a lot to discuss, a fragile economy and rising inflation; it is under pressure to deal with a spike in inflation, but should be cautious about any policy changes."

Despite fears that inflationary pressures could push governments to tighten monetary policy too quickly, Mark Hefele, chief investment officer at UBS Global Wealth Management, said in a note to clients that stocks could still rise.

"As the current problems still look temporary rather than structural, we believe stock markets will continue to rise," Hefele said.

"Indeed, a slight increase in inflation expectations could be positive for the markets if it helps allay fears of deflation. Furthermore, our assessment is that global growth remains robust, supply chain problems should recede in 2022 and corporate earnings should continue to grow."

US stock index futures indicate that Wall Street prices were unchanged at the open after the cash index posted a record closing high overnight, driven by gains in tech stocks.

Facebook, Apple, Amazon and Alphabet, owner of Google, report next week and bulls are hoping to follow Netflix's earnings, which beat forecasts this week.

Meanwhile, the 10-year Treasury bond yield was 1.6908%, down from a five-month high of 1.7050% the day before.

The dollar index, which measures the dollar against six major peers, fell 0.1% to 93.634, despite initially bouncing back from recent lows after US jobless claims fell to a 19-month low, indicating a tighter labour market. 

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The US Federal Reserve said it may start cutting stimulus as early as next month, with a rate hike to follow at the end of next year. Full employment is among the Fed's stated requirements for a rate hike.

Fed Chairman Jerome Powell will speak later on Friday in a panel discussion.

In commodities, oil prices rebounded from overnight lows, rising 0.3%, with both Brent and West Texas Intermediate crude almost on the plus side for the week and previously threatening to break multi-week gains.

Gold rose 0.4% on a weaker dollar, continuing to rise for a second week.