LONDON / TOKYO - European and Asian stocks rallied on Friday, buoyed by hopes that the world's biggest central banks are close to ending a long cycle of rate rises.

Europe's Stoxx 600 index, which rose 1.5 percent on Thursday, gained a further 0.9 percent in early dealings on Friday. In London, the FTSE 100 rose 0.9 percent, buoyed by mining stocks.

The European Central Bank hiked its key interest rate to a record 4 percent on Thursday and warned it would stay at this level until above-target inflation was dealt with.

Still, markets clung to hopes that the ECB, as the euro zone economy weakens, will wait for more evidence its monetary tightening so far has slowed the economy and then tilt towards rate cuts.

"The key thing for markets is that a dovish hike suggests we are getting closer to the end," said Parisha Saimbi, G10 FX rates strategist at BNP Paribas in London. "They are (also) going to wait for the pass through of monetary policy so far, and to this extent equities are performing well."

MSCI's broadest index of Asia-Pacific shares was up 0.7 percent. The index provider's gauge of world stocks rose 0.3 percent.

In currency markets the euro rose 0.1 percent to $1.063, as it clawed its way off an overnight trough of $1.0632, the lowest level since March 20.

A gauge of the US dollar against six of its biggest developed-market peers stuck close to the six-month peak it reached overnight, buoyed primarily by the euro's steep overnight slide on the view that the ECB's rate hike may be its last.

The so-called US dollar index edged down 0.12 percent to 105.23, after hitting the highest since early March at 105.43 on Thursday. The gauge remains on track for its ninth straight weekly advance, the longest run in nine years.

US S&P 500 futures pointed to a 0.18 percent rise on Friday, after the cash index rose 0.84 percent on Thursday.

US data showed producer prices increased by the most in more than a year in August and retail sales also rose more than expected. But both of those figures were swelled by a rise in the price of gasoline, which does not form part of the Federal Reserve's favored measure of underlying, or "core" inflation.

As a result, traders stuck to bets for the Federal Reserve to skip a rate hike next week, in what might be the end of the tightening cycle.

In energy markets, Brent crude futures rose 0.6 percent, to $90.68.