US and European stock markets extended their gains on Friday, ending a strong week for global equities that has propelled benchmarks on both sides of the Atlantic to all-time highs.

The S&P 500 rose 0.8 per cent in New York, a day after the blue-chip index had set another closing high. The Nasdaq Composite gained 0.5 per cent, while the Dow Jones Industrial Average added 0.9 per cent, a record of its own.

A modest sell-off of US Treasuries, triggered by concerns over higher than expected readings on US and Chinese producer prices, faded by late-afternoon, as the yield on the 10-year note finished at 1.67 per cent. Rising inflation eats away at the real value of fixed-interest payments.

The cautious trading came at the end of a record-setting week for bourses, which benefited from relative tranquility in the bond market after heavy bouts of selling last month that sent yields to a 14-month high.

“There has been quite a lot of debate about at what stage higher rates become a problem,” said Sunil Krishnan, head of multi-asset funds at Aviva Investors. “As long as rates volatility is contained, it’s probably something the equity market can weather.”

The region-wide Stoxx Europe 600 index capped a week of records to close fractionally up, marking an all-time high. London’s FTSE 100 dipped 0.4 per cent but remained up 2.7 per cent for the week for its best performance since early January.

“It’s been a fantastic week for the FTSE 100 and S&P 500 as they put Covid in the rear-view mirror and raced ahead,” said Danni Hewson, financial analyst at AJ Bell.

Column chart of FTSE 100 index, weekly % change showing Best week for UK blue-chip benchmark in three months

But Frances Donald, chief economist and head of macro strategy at Manulife Investment Management, cautioned that the level of optimism in markets could lead to another let-down for investors.

“We have probably reached the peak reopening trade and the peak reflation trade,” she said. “Going into the next three months we may be moving away from the concept that everything is awesome.”

Italian 10-year bond yields rose 0.07 percentage points to their highest level since early March after Bloomberg reported that Mario Draghi’s government was preparing to boost public borrowing.

Chinese stocks tumbled after the country’s producer price index jumped by the most in two years. The rise in factory gate prices in March shifted the focus to the possibility of rate rises and a tightening of financial conditions. The CSI 300 index of large Shanghai and Shenzhen-listed stocks closed down 1.5 per cent.

Elsewhere in Asia, Hong Kong’s Hang Seng closed 1.1 per cent lower, Australia’s S&P/ASX 100 dipped 0.1 per cent and Japan’s Topix gained 0.4 per cent.