Volkswacht Bodensee - Interest rate concerns, inflation hobble stock markets

London's benchmark FTSE 100 index ended 0.1 percent lower after official data stoked expectations of another interest-rate hike from the Bank of England that could weigh further on the economy.

Britain's annual inflation rate slowed in March but held above 10 percent on soaring food prices, further fuelling the country's cost-of-living crisis.

Wall Street was also lower in late morning trading, while Asian markets ended mostly lower.

Frankfurt and Paris bucked the trend, however, edging higher.

World oil prices shed two percent on fears the US Federal Reserve could also hike rates sharply again, in turn denting demand for crude, before paring losses.

- Souring the mood -

"Stubbornly high inflation soured the mood," noted Russ Mould, investment director at stockbroker AJ Bell.

"News that UK CPI (Consumer Prices Index) remains in double-digits will only strengthen the argument for the Bank of England to keep pushing up interest rates."

The BoE has hiked rates 11 times since late 2021 in an unsuccessful bid to keep inflation close to a 2.0-percent target.

Higher borrowing costs have exacerbated the UK's cost-of-living crisis, ramped up loans for businesses and consumers alike and dampened activity.

Investors are also focusing on earnings from Morgan Stanley bank and electric carmaker Tesla, which reports after the close of US trading.

Morgan Stanley reported drops in both revenue and profit as deal-making business dropped. Its shares dropped three percent at the start of trading, but made up much of the loss.

"After a reasonable start to earnings season we have seen a more cautious mood creep in, which is understandable given the fears about a recession happening within the next year," said Chris Beauchamp, chief market analyst at online trading platform IG.

"Losses have been relatively contained however, with stocks caught more in a period of indecision rather than heading into another big sell-off," he added.

Wall Street's main indices were down in late morning trading, with the Dow shedding 0.4 percent.

Analyst Stephen Innes, of SPI Asset Management, said investors were dwelling on the Fed's outlook.

"Global traders have seemingly moved into defensive mode as the debate goes on whether the Fed is at the top of its hiking cycle," Innes noted.

That debate remained far from settled, with some analysts warning that certain investors' apparent confidence in coming rate cuts was misplaced.

Briefing.com analyst Patrick O'Hare pointed to rising US bond yields, an indication of higher borrowing costs for companies and consumers.

This "has cast some pressure on growth stocks that had been rallying with the move down in rates and expectations that the Fed will cut rates more than once before the end of the year," he said.

"With the re-think on that front, some money is being taken off the table," he added.

- Key figures around 1530 GMT -

New York - Dow: DOWN 0.4 percent at 33,859.11 points

London - FTSE 100: DOWN 0.1 percent at 7,898.77 (close)

Frankfurt - DAX: DOWN less than 0.1 percent at 15,895.20 (close)

Paris - CAC 40: UP 0.2 percent at 7,549.44 (close)

EURO STOXX 50: FLAT at 4,393.57 (close)

Tokyo - Nikkei 225: DOWN 0.2 percent at 28,606.76 (close)

Hong Kong - Hang Seng Index: DOWN 1.4 percent at 20,367.76 (close)

Shanghai - Composite: DOWN 0.7 percent at 3,370.13 (close)

Euro/dollar: UP at $1.0960 from $1.0954 on Tuesday

Pound/dollar: UP at $1.2442 from $1.2425

Dollar/yen: UP at 134.67 yen from 134.12 yen

Euro/pound: DOWN at 88.09 pence from 88.31 pence

West Texas Intermediate: DOWN 1.4 percent at $79.70 per barrel

Brent North Sea crude: DOWN 1.5 percent at $83.54 per barrel

burs-rl/cw

N.Fournier--BTB