Europe's main stock markets rallied and the dollar weakened Friday, closing out a volatile week for financial assets as investors assess the outlook for interest rates.

Approaching the half-way stage, London, Frankfurt and Paris were up about one percent.

Hong Kong closed down 2.1 percent, with shares in Chines e-commerce titan Alibaba hammered after the company cancelled a spinoff of its cloud computing arm, citing the US-China chip war.

Crude prices gained but made little headway after Thursday's collapse of almost five percent caused by weak demand expectations amid China's softening economy.

Major crude contract, West Texas Intermediate, fell into a so-called bear market having shed more than 20 percent from its recent peak, with pledges from Saudi Arabia and Russia to maintain output cuts unable to provide enough support.

Rising stockpiles of US crude added to pressure on prices.

In equities trading, other Asian stock markets struggled following a soft lead from Wall Street on Thursday, as the United States reported a rise in jobless claims.

The data followed weaker-than-expected US inflation data this week which fanned hopes that the Federal Reserve would not need to further hike interest rates before cutting.

The data gave a strong boost to global stock markets earlier in the week.

"The optimism seen in equity markets could reflect the potential impact any economic weakness could have on the timing of a rate cut," noted Joshua Mahony, chief market analyst at Scope Markets.

"With crude declines dampening inflation expectations, a notable period of economic weakness would likely see markets increasingly bring forward their expected timing for an initial rate cut."

However, traders remain on edge that the Federal Reserve has left the door open to a possible hike as inflation remains elevated and despite warnings that the world's top economy could be in danger of slipping into recession.

Those worried about a downturn pointed to US unemployment benefits being at their highest in two years, factory production dropping more than forecast and homebuilder sentiment at its weakest in 2023.

Shares in Alibaba slumped 10 percent after its shock announcement Thursday that US curbs on exports of advanced chips forced it to scrap the spinoff.

Washington has moved to bar the shipment to China of powerful chips, including those from California-based Nvidia, which are crucial to the development of artificial intelligence, on national security grounds.

Key figures around 1115 GMT 

London - FTSE 100: UP 1.0 percent at 7,480.71 points

Paris - CAC 40: UP 0.9 percent at 7,233.16

Frankfurt - DAX: UP 0.9 percent at 15,927.64

EURO STOXX 50: UP 0.9 percent at 4,339.31

Tokyo - Nikkei 225: UP 0.5 percent at 33,585.20 (close)

Hong Kong - Hang Seng Index: DOWN 2.1 percent at 17,454.19 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,054.37 (close)

New York - Dow: DOWN 0.1 percent at 34,945.47 (close)

Euro/dollar: UP at $1.0870 from $1.0851 on Thursday

Pound/dollar: UP at $1.2432 from $1.2411

Dollar/yen: DOWN at 149.37 yen from 150.76 yen

Euro/pound: UP at 87.43 pence from 87.41 pence

West Texas Intermediate: UP 1.2 percent at $73.76 per barrel

Brent North Sea crude: UP 1.2 percent at $78.36 per barrel