LONDON (Reuters) – Stocks were stranded just below record highs on Friday, with investors left looking for direction after digesting the U.S. Federal Reserve’s more hawkish stance.

The pan-European STOXX index of shares eased 0.19% to 458.50 points, barely below Monday’s record high of 460.51.

“I would not expect too much of a change,” Michael Hewson, chief market analyst at CMC Markets, said of the market.

“What has the Fed said that is particularly upsetting in terms of the outlook for interest rates and monetary policy? We are still talking 18 months’ time. It suggests the economy is improving and that is a good thing,” Hewson said.

The MSCI world equity index was off 0.13% at 713.97 points after hitting a record high of 722.32 on Tuesday, while Paris and Frankfurt were little changed.

Stocks in London fell 0.4% after data showed British retail sales fell unexpectedly last month as a lifting of lockdown restrictions encouraged spending in restaurants rather than shops, with Tesco down 1.8%.

Britain’s biggest retailer reported a sharp slowdown in underlying UK sales growth in its first quarter, reflecting a tough comparison with the same quarter last year when consumers stocked up in the country’s first COVID-19 lockdown.

The dollar was heading for its best week in nearly nine months as investors priced in a sooner-than-expected ending to extraordinary U.S. monetary stimulus.

Strength in the greenback pushed oil lower for a second straight session, while spot gold remained down around 5% for the week after the Fed dented the yellow metal’s safe haven appeal.

No major data is expected and corporate news was thin, leaving investors to continue pondering what the Fed’s comments will mean for the assets they hold in coming months.

INFLATION GENIE

While the Fed messaging indicated no clear end to supportive policy measures such as bond buying, signals of faster-than-expected rate hikes indicated its concern about inflation as the U.S. economy recovers from the COVID-19 pandemic.

“What is pretty obvious is that the inflation genie is starting to sneak out of the bottle, and that will be a major driver of interest rates in the short to medium term,” said James McGlew, executive director of corporate stockbroking at Argonaut in Perth.

In Europe, analysts were already asking if the Bank of England, whose monetary policy committee meets next week, will follow in the Fed’s footsteps and adopt a more bullish tone on the economy and what that would mean for the path of UK stimulus and interest rates.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was flat after falling for four sessions.

Chinese blue-chip A shares were also little changed, along with Japan’s Nikkei.

Gold prices, which plunged following the Fed comments, edged higher but were still set for their worst week since March 2020. Spot gold was last up 1% at $1,790 per ounce. [GOL/]

Hopes for a strong U.S. recovery pushed technology stocks higher on Thursday, lifting the Nasdaq Composite up 0.87%. But worries about inflation and higher rates weighed on the broader market, with the S&P 500 edging down 0.04%. The Dow Jones Industrial Average fell 0.62%.

Higher expectations of inflation continued to lift long-dated U.S. Treasury yields. Benchmark 10-year notes yielded 1.4802%, off 0.031 from a close of 1.511% on Thursday.

The dollar pulled back against the yen to 110.02, and the euro was flat at 1.1914.

Oil prices took a hit from the strong dollar as concerns over demand and new Iranian supply also weighed.

Global benchmark Brent crude was down 0.68% at $72.63 a barrel after settling at its highest price since April 2019 on Wednesday. U.S. West Texas Intermediate crude, which touched its highest level since October 2018 on Wednesday, shed 0.42% to $70.74.

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