Volkswacht Bodensee - Data drags stocks in divergent directions

The dollar jumped on reinforced expectations of more rises to US interest rates as the pace of the drop in price rises was less than hoped and retail sales data showed the world's biggest economy remains robust.

Analysts said a bigger-than-expected drop in UK inflation could see the Bank of England pause its rate-tightening cycle.

"After a US inflation number which proved a mild disappointment to the market..., the UK's own inflation reading came in lower than expected," noted AJ Bell investment director Russ Mould.

The much-anticipated US inflation update Tuesday showed a slight slowdown in January from the previous month -- but the 6.4-percent reading was higher than forecast.

On Wednesday, official data showed UK annual inflation has eased to 10.1 percent last month from 10.5 percent to December.

London stocks were up 0.2 percent in afternoon trading. Frankfurt added 0.5 percent and Paris rose 0.9 percent.

Central banks have massively hiked interest rates over the past year in a bid to cool decades-high inflation.

"Investors are trying to work out how the US Federal Reserve might react as they desperately look towards the milestone of the final rate hike in this cycle," said Mould.

"For now, markets are retaining some confidence that this pivot isn't too far away."

But that confidence was shaken by data released ahead of trading on Wednesday showing that retail sales rebounded by three percent month-on-month, outpacing expectations.

Another indicator showed that manufacturing in the northeast was still contracting, but at a slower pace.

Briefing.com market analyst Patrick O'Hare said the retail sales data will ease concerns that the US economy is already headed towards recession.

"But at the same time it will contribute to the burgeoning concern that the Fed will raise rates more than expected, leave them at a high level for longer than expected, and potentially trigger a hard landing later," he said.

Wall Street stocks dropped at the opening bell, with the Dow shedding 0.6 percent.

In Asia Wednesday, Hong Kong led losses with a drop of 1.4 percent -- the recent boost from China's reopening from zero-Covid running out of steam.

In equities trading, shares in Barclays slumped 8.1 percent after the British bank missed its earnings target in the final quarter of last year due to higher provisions for loans it expects to turn sour on fallout from high inflation.

Dutch brewer Heineken reported a jump in 2022 sales after it passed increased costs onto consumers -- but its net profit fell. Its shares rose two percent in afternoon trading.

- Key figures around 1430 GMT -

New York - Dow: DOWN 0.6 percent at 33,899.76 points

London - FTSE 100: UP 0.2 percent at 7,972.37

Frankfurt - DAX: UP 0.5 percent at 15,455.51

Paris - CAC 40: UP 0.9 percent at 7,281.43

EURO STOXX 50: UP 0.6 percent at 4,264.92

Tokyo - Nikkei 225: DOWN 0.4 percent at 27,501.86 (close)

Hong Kong - Hang Seng Index: DOWN 1.4 percent at 20,812.17 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,280.49 (close)

Euro/dollar: DOWN at $1.0678 from $1.0739 on Tuesday

Pound/dollar: DOWN at $1.2007 from $1.2176

Euro/pound: UP at 88.92 pence from 88.17 pence

Dollar/yen: UP at 134.04 yen from 133.07 yen

West Texas Intermediate: DOWN 0.6 percent at $78.56 per barrel

Brent North Sea crude: DOWN 0.7 percent at $85.02 per barrel

burs-rl/lth

B.Shevchenko--BTB