San Francisco Frontiers - Stocks wobble as US inflation cools

US consumer prices rose by 5.0 percent last month on an annual basis, down from 6.0 percent in February, the figures showed. It was the smallest increase since May 2021 and better than forecast by analysts.

But core inflation, which excludes food and energy prices, accelerated to 5.6 percent in March from 5.5 percent the previous month.

European markets closed higher, with a roller-coaster day for the Paris CAC 40, which hit a record high and fell at one point before finishing in the green.

Wall Street's main indices seesawed during morning deals after opening higher following the release of the inflation reading.

The dollar fell against other major currencies.

"Sentiment has shifted in the market as traders believe that core inflation is still sticky and provided oil prices are still high, the job is not done with respect to inflation," Naeem Aslam, chief investment officer at Zaye Capital Markets, told AFP.

AJ Bell analyst Laith Khalaf said the cooling of overall inflation "suggests the cure of higher interest rates is working."

But, Khalaf added, "core inflation remains stubbornly elevated, and that will continue to cause concern at the Federal Reserve, even if they choose to pause their rate-hiking activities."

The Fed and other major central banks have raised interest rates in efforts to battle inflation after Russia's war in Ukraine sent energy and food prices soaring last year.

Investors have worried the rate hikes could tip the US economy into recession.

The collapse of three US regional banks last month was largely blamed on the higher borrowing costs.

"In light of this (inflation) announcement, the probability of further significant interest rate hikes will now seem less likely," said Srijan Katyal, global head of strategy at ADSS brokerage firm.

"This would be welcomed by those still calling on the Fed to take a steady, measured approach in the wake of the banking crisis that rippled across the world in March," Katyal said.

Concerns about the financial sector, which also led to the emergency takeover of European banking giant Credit Suisse by UBS last month, have eased.

Analysts said the next few days could play a key role in market sentiment, as Wednesday's consumer prices report will be followed by data on wholesale prices Thursday, then the start of the corporate reporting season on Friday.

- 'Be careful' -

A healthy US jobs report on Friday soothed worries about a possible recession, but it could also give wiggle room for the Fed to continue its monetary tightening.

There is a growing hope among traders that the Fed, whose next rate decision is in May, will stop lifting rates soon and could even begin cutting before the end of the year.

There appears to be a split within the Fed over the best way forward.

Chicago Fed boss Austan Goolsbee urged "prudence and patience", saying officials should weigh the effects on the economy of a year-long campaign of tightening as well as the banking upheaval.

However, his New York counterpart John Williams said another increase before pausing was a "reasonable starting place", adding that incoming data should be noted in the decision-making.

- Key figures around 1545 GMT -

New York - Dow: UP 0.1 percent at 33,730.60 points

London - FTSE 100: UP 0.5 percent at 7,824.84

Paris - CAC 40: UP 0.1 percent at 7,396.94

Frankfurt - DAX: UP 0.3 percent at 15,703.60

EURO STOXX 50: FLAT at 4,334.03

Tokyo - Nikkei 225: UP 0.6 percent at 28,082.70 (close)

Hong Kong - Hang Seng Index: DOWN 0.9 percent at 20,309.86 (close)

Shanghai - Composite: UP 0.4 percent at 3,327.18 (close)

Euro/dollar: UP at $1.0983 from $1.0918 on Tuesday

Pound/dollar: UP at $1.2464 from $1.2428

Euro/pound: UP at 88.10 pence at 87.83 pence

Dollar/yen: DOWN at 133.24 yen from 133.69 yen

West Texas Intermediate: UP 1.3 at $82.60 per barrel

Brent North Sea crude: UP 1.3 percent at $86.74 per barrel

burs-lth/bp

O.Green--SFF