San Francisco Frontiers - Strong US inflation dampens stock market enthusiasm

The highly anticipated CPI reading for December showed prices rising by 3.4 percent year-on-year, up from 3.1 percent the previous month and above most analyst forecasts of 3.2-3.3 percent.

And the so-called core inflation rate that strips out food and energy costs stood at 3.9 percent, down from 4.0 percent but higher than the consensus for 3.8 percent.

Global equity markets had powered higher in the closing months of last year on expectations the Federal Reserve and the European Central Bank could soon begin loosening monetary policy as pricing pressures eased.

That prospect now seems less likely, prompting a lower opening on Wall Street before recovering, while European stocks pared earlier gains.

"The rise in headline inflation should dampen expectations for an imminent rate cut as the Fed will be conscious of pinning inflation down to its two percent target before releasing the pressure," said Richard Flax, chief investment officer at the European wealth manager Moneyfarm.

Callie Cox, investment analyst at trading platform eToro, said: "The heat looks to be driven by services prices, which could force markets to keep walking back the rate cut trade."

For many investors the data might have been an excuse to lock in profits from the strong recent run, with Cox adding that most still expect inflation to ease as pressures remain on the global economic outlook.

"We need to see significant weakness in the job market before we're worried about the stock market," she said.

The looming corporate earnings season and its clues on the outlook for 2024 also argued for a cautious stance after Wall Street jumped on Wednesday, led by technology stocks.

In Asia, Tokyo led the way earlier Thursday, piling on 1.8 percent to finish above 35,000 points for the first time since early 1990 as a weak yen boosted exporters.

The eased expectations of US rate cuts gave a boost to the dollar, which reversed earlier losses against its main rival currencies.

Elsewhere, Bitcoin surged after the New York open, rising to nearly $49,000 on news that the US Securities and Exchange Commission had given the go-ahead for wider trading of the world's biggest cryptocurrency in the form of exchange-traded funds.

The SEC approved the plans for 11 ETFs to list on leading exchanges including the New York Stock Exchange "on an accelerated basis", it said.

ETFs are traded on public markets, granting investors exposure to price movements in asset prices without taking direct ownership of the underlying assets.

- Key figures around 1445 GMT -

London - FTSE 100: DOWN 0.1 at 7,645.04 points

Paris - CAC 40: UP 0.4 percent at 7,454.72

Frankfurt - DAX: UP 0.2 percent at 16,716.16

EURO STOXX 50: UP 0.4 percent at 4,487.26

New York - Dow: UP 0.1 percent at 37,733.30

Tokyo - Nikkei 225: UP 1.8 percent at 35,049.86 (close)

Hong Kong - Hang Seng Index: UP 1.3 percent at 16,302.04 (close)

Shanghai - Composite: UP 0.3 percent at 2,886.65 (close)

Euro/dollar: DOWN at $1.0961 from $1.0976 on Wednesday

Pound/dollar: DOWN at $1.2741 from $1.2742

Euro/pound: DOWN at 86.03 pence from 86.10 pence

Dollar/yen: UP at 145.90 yen from 145.77 yen

West Texas Intermediate: UP 2.5 percent at $73.14 per barrel

Brent North Sea Crude: UP 2.2 percent at $78.51 per barrel

K.Torres--SFF