San Francisco Frontiers - Markets slide on inflation worry; oil rebounds

Oil rallied after a sharp fall following a report that OPEC was considering suspending Russia from an output deal, which observers said could allow producers to pump more.

Shares in Frankfurt, Paris and London were all in the red at closing.

Wall Street stocks began June on a high note, rising early in the session before following suit.

"The quick reversal is a reminder that we are still in a bear market and investors continue to face significant risks with inflation still showing no signs of easing in a meaningful way, and central banks are continuing to tighten their belts," Fawad Razaqzada, analyst at City Index and FOREX.com said.

Equities have enjoyed a largely healthy run of late on hopes that inflation could be nearing a peak and a sell-off across markets may have run its course.

The easing of some lockdown measures in China added to the optimism.

But investors were brought down to earth with a bump Tuesday after data showed that eurozone inflation hit a record high in May on rocketing energy costs.

The news puts extra pressure on the European Central Bank to act faster to rein in prices by hiking interest rates, along with the Bank of England and the US Federal Reserve.

"Investors took a pause for breath after the recent rally as the spectre of inflation continues to loom large," said Richard Hunter, an analyst at investment platform interactive investor.

Markets remain fearful as the Ukraine conflict fuels massive price gains for energy and food, translating into spiking inflation -- and damaging the post-pandemic global economic recovery.

"There are heightened concerns around inflation and where central banks are likely to go trying to combat inflation," Kristina Hooper of Invesco Advisers told Bloomberg Radio.

"This has gone from just an inflation scare to a growth scare. Uncertainty has grown."

- Oil rebounds -

Equities were mixed in Asia, with traders shrugging off a further easing of lockdown restrictions in China that many hope will give a much-needed boost to the world's number two economy.

Hong Kong and Shanghai slipped, though Tokyo, Sydney, Singapore and Wellington rose.

The oil market rebounded after tanking by more than four percent late Tuesday in reaction to a Wall Street Journal report that OPEC was considering removing Russia from an agreement that has locked producers into limited output increases.

Moscow's removal would mean an early end to the pact and allow major crude nations such as Saudi Arabia to open the taps, analysts said.

"If there's any confirmation from OPEC+ members that the absence of Russia is being discussed, then prices can drop to as low as $100," said Will Sungchil Yun, at VI Investment Corp.

During a visit to Saudi Arabia Wednesday, Russian Foreign Minister Sergei Lavrov reaffirmed Moscow's commitment to OPEC+ agreements.

On Thursday, the 13 members of the Organization of the Petroleum Exporting Countries and their 10 partners -- who make up OPEC+ -- are due to hold their monthly talks on output increases.

- Key figures at around 1550 GMT -

London - FTSE 100: DOWN 0.98 percent at 7,532.95 points (close)

Frankfurt - DAX: DOWN 0.3 percent at 14,340.47 points (close)

Paris - CAC 40: DOWN 0.8 percent at 6,418.89 points (close)

EURO STOXX 50: DOWN 0.8 percent at 3,759.54 points

New York - Dow: DOWN 1.0 percent at 32,651.66 points

Tokyo - Nikkei 225: UP 0.7 percent at 27,457.89 (close)

Hong Kong - Hang Seng Index: DOWN 0.6 percent at 21,294.94 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,182.16 (close)

Euro/dollar: DOWN at $1.0632 from $1.0734 on Tuesday

Pound/dollar: DOWN at $1.2461 from $1.2602

Euro/pound: UP at 85.34 pence from 85.18 pence

Dollar/yen: UP at 130.11 yen from 128.67 yen

Brent North Sea crude: UP 1.4 percent at $117.17 per barrel

West Texas Intermediate: UP 1.3 percent at $116.11

G.Miller--SFF