San Francisco Frontiers - Stock markets diverge ahead of key inflation data

All the main indexes were lower in New York, following on to Wednesday's slump when shares were hit by concerns that interest rates will stay high for an extended period.

Europe's main stock markets inched higher, but not enough to make up the losses from the previous session.

US Treasury yields held near their recent highs, indicating expectations of higher-for-longer interest rates.

"Much of the optimism that we saw at the beginning of this month appears to be fizzling out," said David Morrison, senior analyst at Trade Nation.

"Sentiment has taken a knock this week thanks to a big jump in yields on US Treasuries. The question now is whether this pullback is the start of a larger retreat, or a minor hiccup before the market recovers its poise in preparation for further gains."

Traders awaited Friday's release of the crucial personal consumption expenditures (PCE) index, the Fed's preferred gauge of inflation, hoping for signs that prices are being brought under control enough for rates to be cut.

Ahead of the data, the Fed's "Beige Book" survey of the world's top economy suggested the outlook had become gloomier, with discretionary spending cooling and consumers more sensitive to costs in recent weeks.

It also said job gains were largely modest to negligible.

The report provided signs the Fed's tight policy stance was having some effect, though with inflation still well above its two percent target, rate-cut hopes have dimmed.

Friday also sees the release of the latest eurozone consumer price index, a key release ahead of the European Central Bank's monetary policy meeting on June 6 and which could decide whether the central bank goes ahead and as expected cuts rates by 25 basis points.

In New York trading, Salesforce shares slumped 19 percent at the opening after reporting disappointing results the previous day.

Elsewhere on Thursday, the Sydney stock market closed lower with shares in BHP shedding 1.7 percent after the Australian mining giant ended its $49-billion takeover bid for British rival Anglo American, whose shares were down five percent in London.

Oil prices fell ahead of this weekend's OPEC meeting over concerns about future demand in China and the United States, while the dollar gave up some of its recent gains.

- Key figures around 1340 GMT -

New York - Dow: DOWN 0.8 percent at 38,135.32

New York - S&P 500: DOWN 0.3 percent at 5,249.90

New York - Nasdaq Composite: DOWN 0.4 percent at 16,851.84

London - FTSE 100: UP 0.5 percent at 8,222.76 points

Paris - CAC 40: UP 0.5 percent at 7,971.38

Frankfurt - DAX: UP 0.3 percent at 18,523.81

EURO STOXX 50: UP 0.4 percent at 4,981.55

Tokyo - Nikkei 225: DOWN 1.3 percent at 38,054.13 (close)

Hong Kong - Hang Seng Index: DOWN 1.3 percent at 18,230.19 (close)

Shanghai - Composite: DOWN 0.6 percent at 3,091.68 (close)

Euro/dollar: UP at $1.0830 from $1.0804 on Wednesday

Pound/dollar: UP at $1.2725 from $1.2702

Dollar/yen: DOWN at 156.65 from 157.70 yen

Euro/pound: UP at 85.11 from 85.03 pence

West Texas Intermediate: DOWN 1.0 at $78.40 per barrel

Brent North Sea Crude: DOWN 1.1 percent at $82.65 per barrel

Y.Harris--SFF