European stock markets on Friday failed to match soaring gains overnight in Asia and on Wall Street, as recession prospects offset a boost from slower US inflation.

London's benchmark FTSE 100 index fell in midday deals after official data indicated that the UK economy was likely at the start of a prolonged recession.

"The FTSE's struggles suggest UK investors are more worried about deteriorating domestic, eurozone and global economies than are hopeful about the US and other central banks easing rate hikes," noted Fawad Razaqzada, market analyst at City Index trading group.

UK investors are more worried about deteriorating domestic, eurozone and global economies than are hopeful about the US and other central banks easing rate hikes- Fawad Razaqzada, market analyst at City Index trading group

Frankfurt and Paris managed to advance around half a per cent but gains were capped as the EU warned the eurozone was set to fall into recession this winter.

Brussels also hiked regional inflation forecasts for 2022 and 2023 on the back of high energy prices.

Asian equities closed sharply higher after a bumper session on Wall Street on Thursday, as lower US inflation dimmed expectations of more aggressive interest-rate hikes from the Federal Reserve.

Hong Kong's main equities index rocketed more than 7.7 per cent, while Tokyo won three per cent.

Shanghai won 1.7 per cent and oil prices rose strongly as China relaxed some hardline COVID-19 restrictions.

In the US, annual inflation came in at a lower-than-expected 7.7 per cent in October, down from 8.2 per cent in September.

The latest inflation data should be welcome news to Fed policymakers because prices are "finally showing some response" to the steep rate hikes, said Rubeela Farooqi of High Frequency Economics.

The dollar slumped against rival currencies following the data release as traders bet that upcoming US interest rate hikes will be smaller than in recent months.

Daniel Berkowitz, senior investment officer for Prudent Management Associates, struck a note of caution regarding the slower inflation. "While it always feels good to see markets rally, we think this... is bordering on silly," he said. "The market is reacting as if this is the continuance of a multiple-month, downward trend in inflation, and it is not."

In the UK, inflation is seen rising further. Currently at 10.1 per cent, the Bank of England is forecasting it will hit around 11 per cent this year before starting to cool.

Traders pounced on the slower US number, however.

Wall Street's Dow shares index was up 3.7 per cent at Thursday's close and the tech-heavy Nasdaq index soared 7.4 per cent.