San Francisco Frontiers - Stocks sag as inflation fears persist

Wall Street's three main indices spent part of the morning in positive territory, but then sank lower.

If the Dow was off only marginally, the broader S&P 500 shed 0.6 percent and the tech-heavy Nasdaq Composite fell 1.1 percent.

London dipped less than a tenth of a percent, but both Frankfurt and Paris fell further.

"The markets remain skittish following recent hot inflation readings that led to a sharp selloff on Tuesday," analysts at US firm Schwab said in a note.

The data showed US annual consumer price inflation slowing by 8.3 percent in August from 8.5 percent in July but markets had expected a bigger fall.

The reading sparked a rout on equities as it stoked concern of more hefty Federal Reserve interest rate hikes.

While higher borrowing costs help to cool inflation, they can also put a brake on economic growth.

Global consumer prices have soared this year on Russia's invasion of Ukraine -- which has hiked energy and food costs -- and because of supply chain strains worsened by Covid lockdowns in China.

Investors were also tracking US government data on Thursday which showed a surprise, 0.3 percent bounce in retail sales in August.

But while the headline gain was much better than the flat result economists had projected, the figure for July was revised down to show a 0.4 percent drop, so the August increase means the total remains below the level in June.

"The key takeaway from the report is that it does not connote much vigor in retail spending activity in August," said analyst Patrick O'Hare at Briefing.com.

First-time jobless claims also fell last week, indicating the US labour market remains tight, and giving Fed policymakers more latitude to continue aggressively raising interest rates.

"Today's US data dump did little to change the market's view of what the Fed might do next week," said Forex.com analyst Fawad Razaqzada.

"Investors are confident the US central bank will tighten monetary policy by 75 basis points on Wednesday, something which could push the economy into slowdown and cause earnings to decline."

- Oil, yen tumble -

Razaqzada said in this economic environment investors are finding it difficult to hold onto stocks which pay low dividends and are taking profits when they can.

Eventually, though, equities will "price in" or reflect the expectations of interest rate hikes.

"Until this happens, it is unlikely that the stock market will be able to shine very brightly," said Razaqzada.

Asian bourses mostly logged cautious gains Thursday, but Shanghai and Seoul dipped.

The yen was under pressure as weak Japanese data further fuelled speculation of possible intervention from the Bank of Japan to support the unit.

Crude prices tumbled nearly four percent following a warning from the International Energy Agency that growth in demand could halt in the final months of this year.

- Key figures at around 1530 GMT -

New York - DOWN less than 0.1 percent at 31,124.96 points

EURO STOXX 50: DOWN 0.9 percent at 3,534.08

London - FTSE 100: DOWN less than 0.1 percent at 7,274.08 (close)

Frankfurt - DAX: DOWN 0.7 percent at 12,937.69 (close)

Paris - CAC 40: DOWN 1.2 percent at 6,147.37 (close)

Tokyo - Nikkei 225: UP 0.2 percent at 27,875.91 (close)

Hong Kong - Hang Seng Index: UP 0.4 percent at 18,930.38 (close)

Shanghai - Composite: DOWN 1.2 percent at 3,199.92 (close)

Dollar/yen: UP at 143.43 yen from 143.08 yen late Wednesday

Euro/dollar: UP at $0.9992 from $0.9981

Pound/dollar: DOWN at $1.1493 from $1.1539

Euro/pound: UP at 86.97 pence from 86.49 pence

Brent North Sea crude: DOWN 3.8 percent at $90.74 per barrel

West Texas Intermediate: DOWN 3.8 percent at $85.09 per barrel

burs-rl/lth

O.Anderson--SFF