Volkswacht Bodensee - US, Europe stocks fall on US inflation data

All three major US Wall Street indexes were lower in early trading, after the Dow and the wider S&P 500 had chalked up all-time highs Wednesday.

In Europe, Paris and Frankfurt were lower in mid-afternoon trading while London was little changed.

Earlier in the day, Chinese stock markets returned to winning ways, closing with solid gains after China's central bank took action to boost purchases of company shares.

As measured by the consumer prices index, US annual inflation slowed to 2.4 percent in September from 2.5 percent in August, the government reported.

But a core measure of inflation that strips out volatile food and energy costs rose to 3.3 percent from 3.2 percent in August.

Both figures were faster than what analysts had expected, and combined with a strong US jobs report last week, they strengthen the case for the US Federal Reserve to make only small reductions to its lending rates.

"The latest CPI figures are hardly a disaster, but after a far stronger-than-expected jobs report last week, many are questioning the Fed's decision to cut by 50 basis points last month," said Bret Kenwell, analyst at eToro.

"The two reports have all but taken another 50 basis point cut off the table next month, while some could argue that it rules out a rate cut of any kind in November."

However, there was some contradictory news Thursday, with the number of Americans filing for unemployment benefits last week jumping to 258,000, the highest level in a year.

Analysts warned the often-volatile statistic could have been distorted by hurricanes across the south-east of the country.

"These rising claims suggest some softening in the labour market, though after a blowout nonfarm payrolls report last week, not many people are too sure about a softening labour market," said Fawad Razaqzada, analyst at Forex.com and City Index.

"More data is needed for many investors to form strong opinions about the direction of US jobs market and thus interest rates."

In London on Thursday, shares in GSK jumped more than five percent after the British pharmaceutical company agreed to pay $2.3 billion in the United States to end lawsuits alleging that its Zantac heartburn drug caused cancer.

Earlier in the day, Shanghai's stock market closed 1.3 percent higher Thursday and Hong Kong rose 3.0 percent.

Hong Kong and mainland markets whipsawed this week as the euphoria over China's recent moves to boost its economy was dampened by a news conference that failed to unveil more measures or give details on those already announced.

On Thursday, however, investors welcomed news that the People's Bank of China had released details of a "swap facility" that will allow "qualified securities, funds and insurance companies" to access more than $70 billion in liquidity to purchase equities.

Oil prices jumped around 1.5 percent as volatility continued to dominate the crude market, with prices rising after Israel's defence minister pledging that his country will strike Iran in retaliation for last week's missile attack.

- Key figures around 1345 GMT -

New York - Dow: DOWN 0.2 percent at 42,412.55 points

New York - S&P 500: DOWN 0.3 percent at 5,776.49

New York - Nasdaq Composite: DOWN 0.4 percent at 18,220.67

Shanghai - Composite: UP 1.3 percent at 3,301.93 (close)

Hong Kong - Hang Seng Index: UP 3.0 percent at 21,251.98 (close)

London - FTSE 100: FLAT at 8,241.93

Paris - CAC 40: DOWN 0.3 percent at 7,540.33

Frankfurt - DAX: DOWN 0.2 percent at 19,213.17

Tokyo - Nikkei 225: UP 0.3 percent at 39,380.89 (close)

Brent North Sea Crude: UP 1.4 percent at $77.64 per barrel

West Texas Intermediate: UP 1.4 percent at $74.28 per barrel

Euro/dollar: UP at 1.0943 from $1.0940 on Wednesday

Pound/dollar: UNCHANGED at $1.3063

Dollar/yen: DOWN at 148.69 yen from 149.35 yen

Euro/pound: UP at 83.79 pence from 83.72 pence

T.Suter--VB