Stock markets end week on soft note

London - Stock markets headed into the weekend pause Friday on a lacklustre note following a broadly positive week for equities as Federal Reserve chief Janet Yellen indicated a softer approach to raising US interest rates.

Little momentum came from Wall Street, which was only slightly higher following a number of corporate earnings reports and economic data.

The day before, the Dow had topped a new record as investors cheered the more dovish tone from the central bank, which has been moving to tighten monetary policy as the world's top economy continues to pick up.

"The US profit reporting season looks likely to be a key market driver over the next couple of weeks," said CMC Markets analyst Ric Spooner.

"Another good... season will be very supportive for stock markets."

On foreign exchanges, the dollar struggled in a week where the US currency came under heavy selling pressure in the wake of Yellen's comments.

Yellen on Wednesday said the US central bank would keep raising the benchmark lending rate gradually as long as the world's top economy continued to grow as expected, taking into account inflation remained below its two percent target.

However, on Thursday she stressed policy decisions could change as new data come in.

US Labour Department data showed that US inflation was flat in June in another sign that price pressures remain weak.

Analysts warned the greenback faced pressure over the long term as global central banks begin to wind in their financial crisis-era stimulus and come into line with the Fed.

Most in view is the European Central Bank, which is mulling tightening measures as the long-troubled eurozone stirs back to life.

"At the moment, there is still a large divergence between the eurozone and the US," according to Milan Cutkovic, market analyst at AxiTrader.

"However, the economy of the eurozone has picked up a lot in the last 12 months, while economic growth in the States has slowed down."

He said the single currency - which is at 14-month highs - could test $1.16, adding: "The outlook for the greenback is turning increasingly negative."

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