Portugal Colonial - Paris, London stock markets rally, as Hong Kong surge fades

By contrast, Hong Kong stocks slumped after rallying for much of the week, as traders awaited guidance on more Chinese stimulus.

There had been more record finishes for the Dow and S&P 500 in New York on Thursday, fuelled by forecast-beating US growth data and news that a key inflation gauge remained in line with the Federal Reserve's target.

Oil prices fell as traders banked profits from a strong week for crude, while the dollar traded mixed against main rivals awaiting more US inflation data Friday.

"European indices are on the rise, as stronger commodity and banking stocks help the FTSE 100, and French luxury retailers basked in the glow of a 10-percent (plus) gain for LVMH," noted Joshua Mahony, chief market analyst at Scope Markets.

The world's largest luxury goods group soared 11.45 percent in Paris midday deals.

Frankfurt rose only slightly Friday, hit by a survey showing consumer sentiment had soured at the start of the year in Germany, Europe's biggest economy.

In the United States, the Fed's preferred gauge of inflation -- the personal consumption expenditures index -- is due Friday, with traders hoping it will provide an idea about the bank's plans for interest rates this year.

That comes after figures showing that the core PCE held steady at policymakers' two percent target in October-December, marking the second successive quarter at that level.

Figures Thursday showed the US economy expanded a much better-than-expected 3.3 percent in the last three months of the year thanks to a strong jobs market and consumer spending.

"There are no recession concerns here, and to make matters even better, we don't see any accompanying blowout growth in prices that are used in the GDP calculation," said Charles Hepworth at GAM Investments.

"Stronger growth without inflation is what everyone wants."

Michael Hewson of CMC Markets said the chances of a cut to US interest rates in March were slim, having been put at around 80 percent at the start of January.

"There is a danger that in cutting rates in March they drive market expectations of further cuts into overdrive, something they have been keen to push back on with recent commentary," he noted.

- Key figures around 1100 GMT -

Paris - CAC 40: UP 2.0 percent at 7,613.00 points

London - FTSE 100: UP 1.2 percent at 7,621.78

Frankfurt - DAX: UP 0.1 percent at 16,931.26

EURO STOXX 50: UP 0.8 percent at 4,618.29

Tokyo - Nikkei 225: DOWN 1.3 percent at 35,751.07 (close)

Hong Kong - Hang Seng Index: DOWN 1.6 percent at 15,952.23 (close)

Shanghai - Composite: UP 0.1 percent at 2,910.22 (close)

New York - Dow: UP 0.6 percent at 38,049.13 (close)

Euro/dollar: DOWN at $1.0866 from $1.0885 on Thursday

Dollar/yen: UP at 147.64 yen from 147.51 yen

Pound/dollar: UP at $1.2735 from $1.2726

Euro/pound: DOWN at 85.34 pence from 85.53 pence

West Texas Intermediate: DOWN 0.9 percent at $76.64 per barrel

Brent North Sea Crude: DOWN 0.5 percent at $82.06 per barrel

V.F.Barreira--PC