Markets were buoyed by indications China and the United States may turn down the heat in their trade spat

London (AFP) - Moves by the United States and China towards dialogue rather than slapping new trade tariffs on each other helped stocks advance Thursday along with a tepid US inflation reading.

“In the end, it wasn’t the fairly uninteresting updates from the Bank of England or the ECB, nor a much-needed, and huge, rise in interest rates from the Central Bank of Turkey, that got the markets moving this Thursday, but rather a disappointing inflation reading from the US,” said Spreadex analyst Connor Campbell.

US consumer price inflation slid to 2.7 percent on an annual basis in August, from 2.9 percent in July, removing one source of pressure that could push the Federal Reserve to raise interest rates faster than the gradual pace it has indicated.

As low interest rates are good for businesses, US stocks pushed higher, while the dollar fell. The Dow was up 0.3 percent in late morning trading.

Markets in Asia started off a rally after the US reached out to China for fresh talks in a bid to avert a trade war, providing some much-needed respite to weary investors.

News that Treasury Secretary Steven Mnuchin had invited top Chinese officials for talks came just under a week after Donald Trump threatened to impose tariffs on all $500 billion worth of imports from China.

China’s commerce ministry on Thursday welcomed the offer and said the two sides were discussing details.

Hong Kong’s Hang Seng Index jumped 2.5 percent, having fallen for six straight days and into a bear market, which is a 20 percent drop from its January record high.

Most other markets in the region followed it higher.

In Europe, London ended the day down 0.4 percent, penalised by a stronger pound which hurts companies which do most of their business globally and convert profits back into sterling.

The European Central Bank indicated it planned to continue reducing its asset purchases, which helped the euro rise against the dollar.

Frankfurt’s DAX 30 managed to remain in the green, but the CAC 40 in Paris slid into the red just before the closing bell.

- Turkish delight -

The biggest surprise on Thursday came from Turkey’s central bank, which announced a massive rate hike to battle soaring inflation and boost the lira, prompting the embattled currency to surge in value.

The central bank hiked the one week repo auction rate 625 basis points from 17.75 percent to 24 percent, significantly higher than the Bloomberg consensus of 21 percent.

The lira reacted strongly to the decision, rising by five percent in value to 6.0 lira to the US dollar. It later shed some of those gains but was still up over 3.3 percent in value at 6.14 to the dollar.

Turkey has in recent weeks been battling through one of the most troubled periods for its economy under the rule of President Recep Tayyip Erdogan, with the lira battered on currency markets in August.

It made the announcement only hours after President Recep Tayyip Erdogan called on the bank to lower interest rates.

Crude oil prices tumbled as Hurricane Florence weakened on its approach towards the US east coast, reducing the risk of damage and disruption to oil installations.

Traders also focused on the International Energy Agency announcing that global oil output hit a record of 100 million barrels per day in August, providing some relief from concerns about supplies as exports from Iran and Venezuela decline.

- Key figures around 1530 GMT -

New York - Dow Jones: UP 0.3 percent at 26,074.81 points

London - FTSE 100: DOWN 0.4 percent at 7,281.57 (close)

Frankfurt - DAX 30: UP 0.2 percent at 12,055.55 (close)

Paris - CAC 40: DOWN 0.08 percent at 5,328.12 (close)

EURO STOXX 50: UP 0.2 percent at 3,334.94

Tokyo - Nikkei 225: UP 1.0 percent at 22,821.32 (close)

Hong Kong - Hang Seng: UP 2.5 percent at 27,014.49 (close)

Shanghai - Composite: UP 1.2 percent at 2,686.58 (close)

Euro/dollar: UP at $1.1675 from $1.1626 at 2100 GMT

Pound/dollar: UP at $1.3101 from $1.3045

Dollar/yen: UP at 111.89 yen from 111.26 yen

Oil - Brent Crude: DOWN $1.30 at $78.44 per barrel

Oil - West Texas Intermediate: DOWN $1.60 at $68.77 per barrel