Volkswacht Bodensee - Equities struggle despite ECB rate signal as data disappoints

The European Central Bank held interest rates steady, as expected, but said the slowing rate of price increases in Europe could open the door to easing monetary policy, raising hopes of a first cut in June.

That helped eurozone stocks pull higher, but they failed to hold onto gains and ended the session lower.

The ECB updated its guidance to say that if inflation in the eurozone keeps falling towards its 2.0 percent target then rate cuts would be appropriate. The next update in its inflation forecast is due for its June meeting.

"The ECB’s decision to update its guidance suggests that an interest rate cut at the next meeting in June is very likely," said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics.

Wall Street's main indices opened higher despite data showing US wholesale prices rose at their fastest annual rate in almost a year last month. The Dow and S&P 500 failed to hold on their gains in morning trading and turned lower.

"The key takeaway from the report is that even with the smaller than expected month-on-month increases, the year-on-year growth rates for PPI (producer price index) and core PPI accelerated," said Patrick O'Hare at Briefing.com.

The increase in wholesale prices is likely to weigh on the US Federal Reserve, which is grappling with an uptick in inflation that threatens to undermine its largely successful battle against rising prices.

Wall Street's main indices were hammered Wednesday by hotter-than-expected March consumer inflation figures that dealt a blow to hopes for a June rate cut. It forced traders to re-evaluate the Fed's outlook for monetary policy, with a warning that the next move could even be a hike.

US data showed Wednesday that the consumer price index (CPI) rose 0.4 percent month-on-month and 3.5 percent year-on-year -- both above consensus for the third month in a row -- and observers warned the pick-up could indicate that the economy isn't cooling enough to allow rate cuts.

It came on the back of other data -- most recently a forecast-busting jobs report -- suggesting the world's number one economy was still in rude health despite borrowing costs being at a two-decade high and inflation well above target.

The reading will give Fed officials more to mull over ahead of their May policy meeting, with their recent guidance of three rate cuts this year now in doubt.

World oil prices sagged, taking Brent crude futures below $90 per barrel although simmering tensions in the Middle East limited losses and kept prices near a six-month high.

Kathleen Brooks, research director at XTB, pointed to oil prices as a source of frustration for central bankers looking to lower interest rates.

"What unifies the ECB, the Fed and the BOE is the potential for the oil price to get to $100, triggering another uptick in inflation," she said.

The dollar has meanwhile surged to 153.33 yen, the strongest since 1990, as chances for US rate cuts diminish.

Tokyo authorities have said they would keep their options open on supporting the unit.

- Key figures around 1530 GMT -

New York - Dow: DOWN 0.6 percent at 38,235.22 points

New York - S&P 500: DOWN 0.2 percent at 5,152.97

New York - Nasdaq Composite: UP 0.3 percent at 16,220.87

London - FTSE 100: DOWN 0.5 percent at 7,923.80 (close)

Paris - CAC 40: DOWN 0.3 percent at 8,023.74 (close)

Frankfurt - DAX: DOWN 0.8 percent at 17,954.48 (close)

EURO STOXX 50: DOWN 0.7 percent at 4,966.68 (close)

Tokyo - Nikkei 225: DOWN 0.4 percent at 39,442.63 (close)

Hong Kong - Hang Seng Index: DOWN 0.3 percent at 17,095.03 (close)

Shanghai - Composite: UP 0.2 percent at 3,034.25 (close)

Dollar/yen: DOWN at 153.30 yen from 152.96 yen on Wednesday

Euro/dollar: DOWN at $1.0704 from $1.0747

Pound/dollar: DOWN at $1.2512 from $1.2543

Euro/pound: DOWN at 85.54 pence from 85.67 pence

Brent North Sea Crude: DOWN 0.6 percent at $89.91 per barrel

West Texas Intermediate: DOWN 1.0 percent at $85.39 per barrel

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R.Flueckiger--VB