Stocks wobble on China data and rate hike fears

Stock markets wobbled on Wednesday as investors were torn between data showing decade-high Chinese factory activity last month and worries about interest rate hikes due to grinding inflation.

The forecast-busting reading on China's manufacturing sector reinforced the view that the world's second-biggest economy would bounce back strongly from last year's period of sluggish growth as businesses start up and people travel again.

That helped Asian markets push higher and the positive sentiment carried over into early European trading. But those gains mostly disappeared after Wall Street opened lower.

"While European and US futures came into the day looking stronger thanks to Chinese factory data, they have found the going harder throughout the rest of the session," said Chris Beauchamp, chief market analyst at the IG online trading platform.

Frankfurt and Paris stocks ended the day lower, but London managed a gain as dovish comments by Bank of England governor Andrew Bailey dented a rally in the pound.

Wall Street stocks spent most of the day in the red, with both the S&P 500 and Nasdaq finishing decisively lower.

The yield on the 10-year US Treasury note, a proxy for expectations of Federal Reserve monetary policy, struck four percent for the first time since early November.

That came after the Institute for Supply Management's (ISM) manufacturing report showed a jump in the prices index, in a move that generated groans from investors who hope for an easing in Fed policy.

The ISM data, coupled with other recent inflation reports from Spain and Germany, do "not necessarily fit the narrative of the sharp move lower in inflation, which many were expecting," said Angelo Kourkafas, investment strategist at Edward Jones.

The US manufacturing figures came after European inflation data also dashed hopes of significant progress in containing inflation.

Germany's annual inflation rate held steady at 8.7 percent, the same level as in January, according to federal statistics agency Destatis.

Inflation in both France and Spain ticked higher.

The latest European pricing data "is not what the European Central Bank wants to see," said a note from Pantheon Macroeconomics.

It added that the figures raise the chances that the central bank will next lift rates by 50 basis points instead of 25 basis points.

Among other markets, oil prices pushed higher following the latest China data, as well as a US petroleum stockpile that showed higher demand for refined products.

- Key figures around 2140 GMT -

New York - Dow: FLAT at 32,661.84 (close)

New York - S&P 500: DOWN 0.5 percent at 3,951.39 (close)

New York - Nasdaq: DOWN 0.7 percent at 11,379.48 (close)

London - FTSE 100: UP 0.5 percent at 7,914.43 (close)

Frankfurt - DAX: DOWN 0.4 percent at 15,305.02 (close)

Paris - CAC 40: DOWN 0.5 percent at 7,234.25 (close)

EURO STOXX 50: UP 0.5 percent at 4,215.75 (close)

Tokyo - Nikkei 225: UP 0.3 percent at 27,516.53 (close)

Hong Kong - Hang Seng Index: UP 4.2 percent at 20,619.71 (close)

Shanghai - Composite: UP 1.0 percent at 3,312.35 (close)

Pound/dollar: UP at $1.2024 from $1.2022 on Tuesday

Euro/pound: UP at 88.71 pence from 87.97 pence

Euro/dollar: UP at $1.0672 from $1.0576

Dollar/yen: FLAT at 136.17 yen

West Texas Intermediate: UP 0.8 percent at $77.69 per barrel

Brent North Sea crude: UP 1.0 percent at $84.31 per barrel