U.S. producer prices rose more than expected in September as the cost of energy surged, a government report showed on Friday, but underlying inflation pressures were muted.

COMMENTS:

CARY LEAHEY, ECONOMIST, DECISION ECONOMICS, NEW YORK

"I would say the report is mixed. The headline was obviously a little higher than expected and of course anything over 1 pct grabs your attention. But if you take out food and energy you are essentially looking at a number that didn't go anywhere and was actually probably a little weaker than expected. So that is a mixed bag but obviously energy is counted in the equation and prices did go up and that has been reflected in the economy. These kinds of energy prices are debilitating to the economy and it is one of the reasons why we haven't been able to get any kind of a glide speed above a 2 percent annual rate."

TODD SCHOENBERGER, MANAGING PRINCIPAL AT THE BLACKBAY GROUP IN NEW YORK

"If you look at the month-over-month, it did cool down a bit, which is interesting. People who expect recent Fed actions to lift inflation are probably right, but I don't think we'll see the impact of that for a few months, so enjoy this while you can.

"This shouldn't impact trading as traders remain focused on earnings and outlooks. That will have a much bigger impact on trades right now."

MARKET REACTION:

STOCKS: U.S. stock index futures held onto their earlier gains.

FOREX: The dollar maintained its losses versus the euro and held its gains versus the yen.

BONDS: U.S. 30-year Treasury bonds hit session highs as core PPI suggested a muted inflation trend.

(Americas Economics and Markets Desk; +1-646 223-6300)