Volkswacht Bodensee - Stocks waver on US recession warning, inflation slowdown

Fresh data provided more signs that the Federal Reserve's interest-rate-hike campaign is bearing fruit as US wholesale prices fell 0.5 percent in March compared to the previous month.

This came after figures on Wednesday showed that US inflation slowed sharply in March to five percent, but minutes from the Fed's most recent policy meeting indicated officials foresaw a recession at the end of the year.

"Investors are weighing up an improving picture for US inflation... versus fears of a recession stateside," said Victoria Scholar, head of investment at trading firm Interactive Investor.

"US central bank policymakers are concerned about the negative economic fallout from the recent turmoil in the banking sector," Scholar said, referring to last month's collapse of three US regional lenders.

London stocks were 0.1 percent higher in mid-afternoon trading as data showed the UK economy unexpectedly stalled in February.

UK supermarket giant Tesco topped the risers, gaining 1.4 percent as a share buyback plan eclipsed news that net profits fell by half at Britain's biggest retailer last year on soaring inflation.

In the eurozone, Frankfurt stocks drifted lower but Paris jumped 0.8 percent after luxury giant LVMH reported bumper first-quarter sales.

The dollar fell to a one-year low against the euro as slowing inflation could prompt the Fed to wind down its rate-hike campaign. The US currency typically gets a boost from higher rates.

- 'Wishful thinking' -

"There is certainly some optimism that prices are heading in the right direction and that inflation is slowing," Michael Hewson, chief market analyst at CMC Markets UK, said.

"However, there is also plenty of room for wishful thinking as markets continue to price in the prospect of rate cuts by year-end."

Investors now have their eyes trained on crucial first-quarter earnings on Friday from top banks including JPMorgan and Citibank following last month's upheaval in the financial sector, which led to the emergency sale of troubled Credit Suisse to Swiss rival UBS.

"For weeks it's all about the trajectory of inflation and subsequent interest rate hikes for investors," noted Nigel Green, head of financial consultancy deVere Group.

"But the focus is now shifting to earnings season," Green said.

"The big banks will be keenly watched as not only do they often set the mood music for the rest of the season, but also because they are more intricately linked to the rest of the economy than most other sectors," Green added.

Asian markets ended mixed after a downbeat start.

Hong Kong edged up despite sharp losses in the tech sector that came after the Financial Times reported that Japan's SoftBank was looking to unload a majority of its holdings in Alibaba.

Oil prices dipped slightly as OPEC said in a monthly report that it still expects global demand for crude to grow by 2.3 million barrels per day this year, even as several of its members recently decided to slash output.

- Key figures around 1340 GMT -

London - FTSE 100: UP 0.1 percent at 7,829.49 points

Paris - CAC 40: UP 0.8 percent at 7,460.41

Frankfurt - DAX: DOWN 0.1 percent at 15,680.03

EURO STOXX 50: UP 0.3 percent at 4,346.11

New York - Dow: DOWN 0.1 percent at 33,610.08

Tokyo - Nikkei 225: UP 0.3 percent at 28,156.97 (close)

Hong Kong - Hang Seng Index: UP 0.2 percent at 20,344.48 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,318.36 (close)

Euro/dollar: UP at $1.1066 from $1.0992 on Wednesday

Pound/dollar: UP at $1.2534 from $1.2485

Euro/pound: UP at 88.28 pence at 88.04 pence

Dollar/yen: DOWN at 132.10 yen from 133.13 yen

West Texas Intermediate: DOWN 0.3 percent at $83.00 per barrel

Brent North Sea crude: DOWN 0.5 percent at $86.96 per barrel

J.Fankhauser--BTB