Volkswacht Bodensee - Stock markets waver after Bank of England rate hike

With UK annual inflation stuck above 10 percent, the BoE had been widely forecast to hike borrowing costs once more, marking the 12th increase in a row.

"The Bank of England is clearly concerned about the stickiness of UK inflation," said Shanti Kelemen, chief investment officer at M&G Wealth and &me.

"Higher interest rates will eventually reduce demand for services, but it takes time for the impact to be translated to the economy."

The Bank of England lifted the key interest rate by a quarter-point to 4.5 percent, the highest level in almost 15 years.

The FTSE 100 in London slid after the news, dropping into the red after earlier gains.

"UK inflation remains stubbornly high," noted Victoria Scholar, head of investment at Interactive Investor.

This is "at odds with the US and Europe which have seen their inflation rates start to come down".

Official data on Wednesday showed US inflation had dipped further, though only marginally, from 5.0 percent in March to 4.9 percent in April.

The US consumer price index reading was the lowest in two years and a tad below what was expected, possibly giving the Fed a little room to take a break in its long-running rate hike campaign.

However, the figure came after last week's stronger than expected print on US jobs creation that showed the world's top economy remained strong, while observers said further evidence was needed to show that rate hikes were bearing fruit.

The April figure was far above the Fed's stated goal of two percent, which some analysts said meant it was unlikely officials would consider cutting rates at the end of the year, as some investors had been betting on.

This helped to support the dollar against major rivals Thursday.

"We need more... prints to clarify that inflation is definitely declining," said Priya Misra at TD Securities.

Still, Wall Street largely cheered the latest data, with the S&P 500 and Nasdaq rallying on Wednesday, helped by a bump in rate-sensitive tech giants.

Investors are also tracking the political battle over raising the US debt ceiling, with Democrats and Republicans unable to reach a deal just weeks before the country runs out of cash to pay its bills.

- Key figures around 1120 GMT -

London - FTSE 100: DOWN 0.3 percent at 7,719.09 points

Frankfurt - DAX: DOWN 0.1 percent at 15,831.75

Paris - CAC 40: UP 0.3 percent at 7,386.75

EURO STOXX 50: UP 0.2 percent at 4,314.53

Tokyo - Nikkei 225: FLAT at 29,126.72 (close)

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 19,743.79 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,309.55 (close)

New York - Dow: DOWN 0.1 percent at 33,531.33 (close)

Euro/dollar: DOWN at $1.0926 from $1.0985 on Wednesday

Pound/dollar: DOWN at $1.2604 from $1.2627

Dollar/yen: UP at 134.22 yen from 134.34 yen

Euro/pound: DOWN at 86.70 pence from 86.98 pence

Brent North Sea crude: UP 0.4 percent at $76.75 per barrel

West Texas Intermediate: UP 1.3 percent at $72.79 per barrel

burs-rox/lth

K.Brown--BTB