Volkswacht Bodensee - Stocks wobble on China and rate hike fears

The forecast-busting reading on China's manufacturing reinforced the view that the world's second-biggest economy would bounce back strongly from last year's period of sluggish growth as businesses start up and people travel again.

That helped Asian markets push higher and the positive sentiment carried over into early European trading. But those gains mostly disappeared after Wall Street opened lower.

"While European and US futures came into the day looking stronger thanks to Chinese factory data, they have found the going harder throughout the rest of the session," said Chris Beauchamp, chief market analyst at the IG online trading platform.

Frankfurt and Paris stocks ended the day lower, but London managed a gain as dovish comments by Bank of England governor Andrew Bailey dented a rally in the pound.

Wall Street was lower in midday trading, with the Dow shedding 0.2 percent.

Rising Treasury bond yields and retailers reporting mixed results weighed on equities, with investors still focused on the prospects of sharper increases in US interest rates.

Minneapolis Fed President Neel Kashkari said in remarks Wednesday that he was open to a quarter or half point interest rate hike when the central bank next meets.

Investors have been concerned that with the US economy running hotter than policymakers hope, rates could stay higher for a longer period of time.

"The fear is that the Fed is going to overshoot, and they're going to raise rates too much and cause a recession," said Adam Sarhan of 50 Park Investments.

Even the rebounding Chinese manufacturing was being seen in the optics of inflation.

China's "stronger than expected economic data is seen as a potential driver of sticky inflation pressures that will accentuate the need for tighter monetary policy", said Briefing.com analyst Patrick O'Hare.

Oil prices struggled despite the China figures pointing to a pick-up in demand from the world's biggest importer of the commodity.

"Ordinarily, a decent set of Chinese economic numbers would have crude oil prices pushing higher," said CMC Markets analyst Michael Hewson.

"A strong rebound was always likely given the economy has been in hibernation for such a long time, with the big question being whether it is sustainable, and on that, the jury is out with inventories currently at high levels, which helps explain why we've since slipped back," he added.

- Key figures around 1630 GMT -

New York - Dow: DOWN 0.2 percent at 32,608.27 points

London - FTSE 100: UP 0.5 percent at 7,914.43 (close)

Frankfurt - DAX: DOWN 0.4 percent at 15,305.02 (close)

Paris - CAC 40: DOWN 0.5 percent at 7,234.25 (close)

EURO STOXX 50: UP 0.5 percent at 4,215.75 (close)

Tokyo - Nikkei 225: UP 0.3 percent at 27,516.53 (close)

Hong Kong - Hang Seng Index: UP 4.2 percent at 20,619.71 (close)

Shanghai - Composite: UP 1.0 percent at 3,312.35 (close)

Pound/dollar: UP at $1.2024 from $1.2013 on Tuesday

Euro/pound: UP at 88.78 pence from 88.01 pence

Euro/dollar: UP at $1.0678 from $1.0583

Dollar/yen: DOWN at 135.94 yen from 136.13 yen

West Texas Intermediate: DOWN 0.3 percent at $76.81 per barrel

Brent North Sea crude: FLAT at $83.45 per barrel

burs-rl/lcm

I.Meyer--BTB