MILAN — Inflation worries weighed on world markets as the trading week drew to a close on Friday.
China's move to tighten lending, a move to counter inflation, was accompanied by a U.S. report that consumer prices rose 0.5 percent last month, the largest gain since June 2009. Most of that is the result of higher gas prices.
The day before, European Central Bank President Jean-Claude Trichet had warned about inflation risks in Europe, causing the 17-nation currency to rally.
The euro was up another 0.1 percent to $1.3373 on Friday — the prospect of higher interest rates, even months away, tends to boost a currency.
Stocks, however, were shaken by the news. Even the successful eurozone bond auctions a day earlier failed to buoy European indexes.
"Although the week could have been catastrophic had the news from Portugal, Spain and Italy not been quite as upbeat, the air of caution that's settling in is certainly warranted," IG Markets Ben Potter said.
The major European indexes were all trading down Friday afternoon. Britain's FTSE was 0.77 percent lower at 5,977.32 and Germany's DAX was down by 0.24 percent to 7,057.87. The CAC-40 in Paris shed 0.19 percent to 3,967.15.
Wall Street opened narrowly mixed after the government said prices and retail sales rose in December, and JP Morgan Chase reported a 47 percent increase in fourth-quarter profits.
The Dow Jones industrial average was down 0.1 percent to 11,720 and the S&P 500 was up 0.1 percent at 1,284.
Oil prices fell to $90.64 a barrel as traders weighed whether demand in a slowly recovering U.S. economy will be enough to push crude above $100 soon. The dollar dropped against the yen at 82.66.
Japan's Nikkei 225 stock average closed down 0.9 percent at 10,499.04 after Prime Minister Naoto Kan's Cabinet resigned en masse and a new government was put in place in a bid to revive the economy.
Investors were taking profits after the Nikkei closed at an eight-month high on Thursday, and the dollar's fall under the 83-yen line hurt exporters.
South Korea's Kospi rose 0.9 percent to 2,108.17, the third time this week that it has reached a record high.
Australia's S&P/ASX 200 gained 0.1 percent to 4,801.50 and benchmarks in India and the Philippines also rose. Indexes in Taiwan, Singapore and New Zealand fell.
Chinese shares closed lower before the central bank announced it had raised the amount of money that banks must keep on reserve for the seventh time in a year, an attempt to counter inflation and cool off growth.
Mindful of the political turmoil linked to past bouts of inflation, Beijing is trying to curb a flood of money in the world's second largest economy following a lending spree triggered by stimulus aimed at fighting the global financial crisis.
The benchmark Shanghai Composite Index fell 1.3 percent to 2,791.34, while the Shenzhen Composite Index of China's smaller, second exchange tumbled nearly 2 percent to 1,232.73.
Analysts in the region were careful not to read too much into Wall Street's lackluster performance from the day before. Asian markets don't always follow trends in other regions, said Kwong Man Bun, chief operating officer at KGI Asia Ltd. in Hong Kong, where the Hang Seng index in Hong Kong was up 0.2 percent.
"Liquidity is quite abundant in Hong Kong," Kwong said. "The Hang Seng will reach 25,000 before the Chinese New Year." In addition, fears were easing over Europe's debt crisis and China's monetary tightening.
"That's why we have seen increasing fund inflows into Hong Kong," he said.
Pamela Sampson in Bangkok and Ji Chen in Shanghai contributed to this report.
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