European and US stocks treaded water Wednesday following data showing accelerating inflation, while the dollar retreated as the Federal Reserve chief maintained a dovish stance on monetary policy.
Producer price index data showed an increase of 7.3 percent for the 12 months ended in June, its largest-ever yearly jump since the Labor Department began tracking it more than a decade ago.
The report comes on the heels of Tuesday's consumer price data that also showed a big rise, prompting an acknowledgement from Fed Chair Jerome Powell that inflation was stronger than the Fed was hoping to see and will remain "elevated" in coming months.
But Powell stuck to his guns on policy, vowing to continue to provide stimulus until the recovery is complete
The US economy still has "a long way to go" to return to full employment following the Covid-19 pandemic, Powell said in his semi-annual testimony to Congress.
The Fed "will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete," he said.
However, the dollar, which had rallied in anticipation that Powell might articulate a timeframe to taper stimulus, pulled back.
Britain's annual consumer price index rate meanwhile jumped to 2.5 percent in June, the highest since August 2018, data showed Wednesday.
"Inflation is getting hotter and hotter," said Markets.com analyst Neil Wilson.
"The Fed and Bank of England will hope that the hot readings are a summer heatwave driven by parts of the economy that were essentially shut down last year."
Investors are on red alert over global inflation as pent-up demand and galloping prices could force policymakers to raise interest rates earlier than thought, hindering the post-Covid economic recovery.
The counterargument is that recent price increases constitute "peak inflation" and will soon ebb.
London stocks fell by 0.5 percent. Stock indices in Frankfurt and Paris were unchanged, with many French traders away for the Bastille Day holiday.
Asian markets fell earlier in the day, and oil prices pulled back after US data showing weakening of gasoline demand.
- Key figures around 2100 GMT -
New York - DOW: UP 0.1 percent at 34,933.23 (close)
New York - S&P 500: UP 0.1 percent at 4,374.30 (close)
New York - Nasdaq: DOWN 0.2 percent at 14,644.95 (close)
London - FTSE 100: DOWN 0.5 percent at 7,091.19 (close)
Frankfurt - DAX 30: FLAT at 15,788.98 (close)
Paris - CAC 40: FLAT at 6,558.38 (close)
EURO STOXX 50: UP 0.1 percent at 4,099.50 (close)
Tokyo - Nikkei 225: DOWN 0.4 percent at 28,608.49 (close)
Hong Kong - Hang Seng Index: DOWN 0.6 percent at 27,787.46 (close)
Shanghai - Composite: DOWN 1.1 percent at 3,528.50 (close)
Euro/dollar: UP at $1.1841 from $1.1776 at 2100 GMT Tuesday
Pound/dollar: UP at $1.3863 from $1.3814
Euro/pound: UP at 85.39 from 85.25 pence
Dollar/yen: DOWN at 109.95 from 110.63 yen
Brent North Sea crude: DOWN 2.3 percent at $74.76 per barrel
West Texas Intermediate: DOWN 2.8 percent at $73.13 per barrel