Volkswacht Bodensee - Stocks cede ground as rate worries return

A welcome decline in eurozone inflation also failed to ease concerns after European Central Bank chief Christine Lagarde said it would still keep raising rates, potentially crimping economic growth in the battle against soaring prices.

Wall Street opened mixed while European stock markets gave up earlier gains.

Asian stocks diverged while the dollar diverged against major currencies as investors focused on the US Federal Reserve's next policy meeting and signs of weakness in China's economy.

Investors had earlier cheered the US House of Representatives' approval on Wednesday of a deal between US President Joe Biden and Republican leaders to raise the debt ceiling.

The bill now moves to the Senate before Biden can sign it off as the government faces a June 5 deadline when it could run out of cash.

The accord ended weeks of wrangling that had kept investors on edge, but attention soon returned to the possibility of further rate increases in the world's largest economy.

Non-farm payroll data on Friday, followed by May manufacturing and inflation data in the coming days, will be key numbers ahead of the next Fed policy meeting on June 14.

"Whether the rate hike probabilities will shift significantly again will now depend on three key data releases between now and the FOMC's next meeting," said Fawad Razaqzada, a market analyst at StoneX.

The likelihood of further rate hikes in Europe also kept investors cautious, even though sliding energy prices saw eurozone inflation dip to 6.1 percent in May from 7.0 percent in April.

"While inflation was less than expected, this didn't stop the European Central Bank's hawkish rhetoric," Razaqzada said.

- China worries -

"Inflation in the eurozone has been falling faster than anticipated," said Richard Flax, chief investment officer at Moneyfarm.

But "this is unlikely to stop the ECB from pressing ahead with further rate rises," he added.

In Asia, ongoing weakness in China's economy dampened the mood, after a rally sparked by the lifting of zero-Covid measures last year fades.

On Wednesday, figures showing that the country's vast manufacturing sector contracted further last month highlighted the difficult task Beijing faces to kickstart growth.

But there was some good news Thursday in a private survey that suggested China's economy had expanded slightly, as the Caixin manufacturing index reading beat estimates for a contraction.

- Key figures around 1400 GMT -

New York - Dow: DOWN 0.2 percent at 32,835.52 points

London - FTSE 100: UP 0.1 percent at 7,455.02

Paris - CAC 40: FLAT at 7,098.20

Frankfurt - DAX: UP 0.6 percent at 15,754.88

EURO STOXX 50: UP 0.3 percent at 4,233.19

Tokyo - Nikkei 225: UP 0.8 percent at 31,148.01 (close)

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 18,216.91 (close)

Shanghai - Composite: FLAT at 3,204.63 (close)

Euro/dollar: UP at $1.0730 from $1.0689 on Wednesday

Dollar/yen: DOWN at 138.85 yen from 139.34 yen

Pound/dollar: UP at $1.2506 from $1.2441

Euro/pound: DOWN at 85.77 pence from 85.92 pence

Brent North Sea crude: DOWN 0.3 percent at $72.37 per barrel

West Texas Intermediate: DOWN 0.1 percent at $68.02 per barrel

O.Bulka--BTB