Global shares struggle as investors weigh up chances of a mega Fed rate hike and downbeat earnings

A downbeat read of the Chinese economy and gloomy earnings added to the pressure on investor sentiment as global shares sagged on Friday.

The stock market has been battered this week by mounting evidence that inflation could hurt global growth. In the second quarter of this year, China's economic growth was 0.4%, missing market expectations for a rise of 1.0% and down from 4.8% growth in the first quarter.

The S&P 500 was up around 2% in European trading, while the index was headed for a 3.0% fall this week.

In Europe, the Stoxx 600 traded up 0.85%, but was on course to post a 7% drop on the week, weighed down by losses in Chinese blue chips after Friday's dismal GDP figures

The dollar was set for a third week of gains, fueled by a mixture of safe-haven buying as investors fret about the prospect of a recession and an expectation for juicier returns on US assets.

Morgan Stanley and JP Morgan reported disappointing results. The drag of a strong dollar is making itself felt, as evidenced by the missed estimates by both banks.

The costs of dollar strength are clear even though the US is more domestic focused. Ben Laidler, eToro global markets strategist, said that earnings for the S&P 500 index are being cut by 5% due to the dollar's strength.

Bank of America and Goldman are due next week.

A key litmus test of how the consumer is holding up in an environment where inflation is running at 41-year highs and mortgage rates are at their highest since 2008 will be offered on Friday. Retail sales data for June is expected to show consumer spending rose by 0.9%, a reversal from May's 0.3% contraction, while a read on sentiment is expected to show consumer confidence hitting a record low.

With inflation running at 9.1%, investors are attaching a growing chance that the Fed could raise rates by as much as a full percentage point when it meets later this month. Prior to Wednesday's consumer inflation reading for June, there was a very low chance of such an increase.

"Just as the June UMich consumer inflation survey spooked the Fed into a 75bps hike last month, traders are betting that the same thing will happen this month." Michael Brown is the chief strategist at Caxton FX.

The price of oil fell below $100 a barrel for the fifth week in a row. West Texas Intermediate crude was down 3.0% at 95.47 a barrel.

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