Volkswacht Bodensee - Stocks waver after hitting record highs

Wall Street was mixed in early trading, with the Dow flat as it stood close to the 40,000-point mark while the broad-based S&P 500 and tech-heavy Nasdaq built on gains from the day before.

Following Wednesday's dramatic surge that led to records across the major US indices, "the market has earned the right to just pause and consolidate that move," said Adam Sarhan of 50 Park Investments.

London, Paris and Frankfurt stock markets were all in the red in afternoon trading, one day after striking their own records over expectations of rate cuts in the eurozone and the UK.

"Profit-taking is likely to be the main driver behind today's weakness in stocks," City Index analyst Fawad Razaqzada told AFP.

"Given that we have not had any major catalysts to drive markets lower, I would not be surprised if the small dip is bought yet again" by traders, which would send European markets back into positive territory.

Asian equities rallied Thursday after US data showed inflation cooled last month, fuelling speculation that the Federal Reserve will cut interest rates twice this year and sending Wall Street to record heights on Wednesday.

"European markets have failed to follow the bullish theme set in the United States," said Scope Markets analyst Joshua Mahony.

"The FTSE 100 in particular has been hindered by the heavy weighting of energy stocks" as a large component of the index.

US inflation came in at 3.4 percent in April on an annual basis, down from 3.5 percent in March, data showed Wednesday.

The April reading was in line with forecasts and capped a run of three straight months above estimates that had forced investors to reel in their rate cut hopes.

Sentiment was given an extra boost by figures showing retail sales well below expectations, suggesting consumers were taking a step back.

Fed data on Thursday showed US factory output was flat in April, missing analyst expectations of a third straight monthly increase.

Yet traders remain anxious because US inflation remains well above the Fed's two-percent target.

The Fed is now tipped to reduce borrowing costs twice before the end of the year, an increase on the one previously predicted -- though a lot fewer than the six estimated in January.

Oil prices, meanwhile, rallied after dropping over concerns about demand.

- Key figures around 1400 GMT -

New York - Dow: FLAT at 39,906.49 points

London - FTSE 100: DOWN 0.1 percent at 8,440.12

Paris - CAC 40: DOWN 0.6 percent at 8,189.56

Frankfurt - DAX: DOWN 0.7 percent at 18,743.46

EURO STOXX 50: DOWN 0.5 percent at 5,074.50

Tokyo - Nikkei 225: UP 1.4 percent at 38,920.26 (close)

Hong Kong - Hang Seng Index: UP 1.6 percent at 19,376.53 (close)

Shanghai - Composite: UP 0.1 percent at 3,122.40 (close)

Euro/dollar: DOWN at $1.0858 from $1.0886 on Wednesday

Dollar/yen: UP at 155.48 yen from 154.83 yen

Pound/dollar: DOWN at $1.2648 from $1.2681

Euro/pound: UP at 85.84 from 85.77 pence

Brent North Sea Crude: UP 1.1 percent at $83.66 per barrel

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

burs-lth/cw

M.Vogt--VB