Volkswacht Bodensee - Anxiety over Middle East hits stocks in Europe, Asia

Deep losses in Asia carried over into European trading, while Wall Street's main indices finished a choppy session little changed.

Federal Reserve Chair Jerome Powell meanwhile said reining in inflation could take "longer than expected" following recent economic data that have pushed back expectations for interest rate cuts

Israel and Iran traded threats after Tehran's first-ever direct attack on its arch-foe over the weekend sharply heightened regional tensions, as the Gaza war grinds on with no truce in sight.

"Sentiment is shaky at best right now with heightened geopolitical tensions in the Middle East, coming alongside increased concerns that the Federal Reserve may opt to maintain interest rates at the current levels for some time yet," noted analyst Joshua Mahony at Scope Markets.

Tehran fired hundreds of missiles and drones at Israel on Saturday, saying the attack was retaliation for an April 1 presumed Israeli strike on the consular annex of its Damascus embassy that killed seven Revolutionary Guards including two generals.

While air defense systems destroyed the vast majority of the barrage and Iran said "the matter can be deemed concluded," Israel's army chief General Herzi Halevi warned that there would be a response, fueling worries of an escalation.

"The key for markets will now be the extent of the retaliation," said Matthew Ryan, head of market strategy at financial services firm Ebury.

"Should Israel follow up with similarly ambitious missile attacks or, under a worse-case scenario, other nations become embroiled in the conflict, notably the US, then we would likely see a flight to safety in markets.

"The threat to global oil supply would also likely trigger a sharp move upwards in oil prices, which could comfortably jump above $100 a barrel should investors fear a wider regional war."

But oil prices largely shrugged off the fresh rhetoric, finishing little changed.

- China's mixed data -

In Asia, traders digested figures showing Chinese expansion beat expectations in the first three months of the year but retail and industrial data came in well below par, suggesting leaders have much work to do to kickstart growth.

Investors appeared to ignore figures showing China's economy grew 5.3 percent in the first three months of the year, above the 4.6 percent predicted in an AFP survey of analysts.

Other data reinforced worries about the outlook, with industrial production and retail sales coming in well below forecasts, ramping up worries about the prospects for the next quarter.

Shanghai stocks fell 1.7 percent and Hong Kong 2.1 percent.

- Key figures around 2050 GMT -

New York - Dow: UP 0.2 percent at 37,798.97 (close)

New York - S&P 500: DOWN 0.2 percent at 5,051.41 (close)

New York - Nasdaq Composite: DOWN 0.1 percent at 15,865.25 (close)

London - FTSE 100: DOWN 1.8 percent at 7,820.36 (close)

Paris - CAC 40: DOWN 1.4 percent at 7,932.61 (close)

Frankfurt - DAX: DOWN 1.4 percent at 17,932.61 (close)

EURO STOXX 50: DOWN 1.4 percent at 4,916.99 (close)

Tokyo - Nikkei 225: DOWN 1.9 percent at 38,471.20 (close)

Hong Kong - Hang Seng Index: DOWN 2.1 percent at 16,248.97 (close)

Shanghai - Composite: DOWN 1.7 percent at 3,007.07 (close)

Dollar/yen: UP at 154.72 yen from 154.28 yen on Monday

Euro/dollar: DOWN at $1.0622 from $1.0624

Pound/dollar: DOWN at $1.2426 from $1.2446

Euro/pound: UP at 85.45 pence from 85.36 pence

Brent North Sea Crude: DOWN 0.1 percent at $90.02 per barrel

West Texas Intermediate: DOWN 0.1 percent at $85.36 per barrel

burs-jmb/nro

L.Maurer--VB