London (AFP) - Stubborn inflation in the United States hit Wall Street on Tuesday, while the London stock market struck a record peak close to 8,000 points.
Investors had been waiting eagerly for the latest inflation data as the US Federal Reserve has indicated that it is looking for it to come down before relenting in its campaign of rising interest rates.
While the consumer price index (CPI), an important inflation gauge, eased from last year's decades-high levels, the dip to an annual rate of 6.4 percent in January was higher than the 6.2 percent expected in the analyst consensus forecast compiled by Bloomberg.
The 0.5 percent month-on-month rise was higher than the 0.1 percent gain in December, driven by rising rent and gasoline costs.
"The key takeaway from the report is that there has been a clear deceleration from peak inflation," said market analyst Patrick O'Hare at Briefing.com.
"However, the inflation rates are not nearly low enough to suggest the Fed would even be thinking about cutting rates this year," he added.
Stocks have recently rallied on hopes that moving past peak inflation would allow the Fed to pause and maybe even begin reversing rate hikes this year.
Neal Keane, head of sales trading at the international brokerage ADSS, said the inflation report combined with a booming jobs market means investors shouldn't rule out the Fed even increasing the size of its expected rate hike next month, from a quarter to a half percentage point.
"Markets will reassess recent peak inflation themes, and with more strong US data likely to force the Fed to continue to hike rates for longer, we can expect further stock market weakness, a stronger dollar, and weaker commodities."
Wall Street stocks were lower in late morning trading, with the Dow down 1.1 percent.
The dollar, which had slid against main rivals ahead of the data, rebounded before then wobbling against the euro.
FTSE flirts with 8,000
In London, the benchmark FTSE 100 shares index struck an all-time high of 7,996.35 points in morning deals after reaching new heights in recent sessions.
"The tailwinds from another decent market performance in the US overnight have given the FTSE another boost, propelling it to a new record high and towards the psychologically important 8,000 barrier," Interactive Investor analyst Richard Hunter told AFP.
"The index continues to attract investment interest with its exposure to banks and energy companies still seeing the benefits of rising interest rates and a recovering Chinese economy respectively."
Shares in Vodafone won 3.6 percent after US telecoms giant Liberty Global snapped up a near five-percent stake in its British rival but ruled out a takeover.
After spending most of the day higher, London, Frankfurt and Paris stocks ended near their starting levels.
Asian equity indices ended on a mixed note after a shaky couple of weeks.
Oil prices tumbled after recent gains fuelled by key producer Russia's decision to curb output following more Western sanctions over Ukraine.
"Crude oil prices have slipped back from their highest levels in two weeks after the US government said it would release more crude oil from its Strategic Petroleum Reserve, as it looks to keep a lid on prices," said market analyst Michael Hewson at CMC Markets.
Key figures around 1630 GMT
New York - Dow: DOWN 1.1 percent at 33,886.01 points
London - FTSE 100: UP less than 0.1 percent at 7,953.85 (close)
Frankfurt - DAX: DOWN less than 0.1 percent at 15,380.56 (close)
Paris - CAC 40: UP less than 0.1 percent at 7,213.81 (close)
EURO STOXX 50: DOWN less than 0.1 percent at 4,238.76 (close)
Tokyo - Nikkei 225: UP 0.6 percent at 27,602.77 (close)
Hong Kong - Hang Seng Index: DOWN 0.2 percent at 21,113.76 (close)
Shanghai - Composite: UP 0.3 percent at 3,293.28 (close)
Euro/dollar: DOWN at $1.0720 from $1.0723 on Monday
Dollar/yen: UP at 132.91 yen from 132.42 yen
Pound/dollar: UP at $1.2154 from $1.2139
Euro/pound: DOWN at 88.19 pence from 88.33 pence
Brent North Sea crude: DOWN 1.7 percent at $85.18 per barrel
West Texas Intermediate: DOWN 1.9 percent at $78.63 per barrel
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