Stock markets see-sawed on Wednesday as volatility returned, sparked by surprisingly strong American consumer price data briefly rekindling inflationary fears that last week sent world markets into a tailspin.
European equity markets took fright, briefly tumbling into the red, as higher-than-expected US inflation fed expectations that borrowing costs might be ramped up very soon.
US consumer price inflation jumped to 0.5 percent in January and the core consumer price index, which excludes volatile food and fuel categories, rose 0.3 percent, the largest increase since January 2017.
Wall Street opened lower in a knee-jerk reaction to the data, but then turned positive as investors felt that the initial reaction had been overdone, particularly as US retail sales figures, released at the same time, showed a weak reading.
Wall Street's rebound helped soothe frayed nerves in Europe, where key indices closed with healthy gains and mostly at better levels than those seen before the US release.
- No 'game-changer' -
"This is not a game-changer," said Viraj Patel, strategist at ING, said of the data.
A Fed rate hike was widely expected for next month, Patel said, but the market was not convinced of the central bank's "ability to deliver more than three hikes this year" overall.
However, while avoiding a rerun of last week's bloodbath that wiped trillions of dollars off stock valuations, "markets are responding with higher volatility in light of today's data", Marvin Loh, strategist at BNY Mellon said.
"Volatility has crept back into the market," he said.
Oliver Jones at Capital Economics, meanwhile, warned that the respite for the US stock market was probably going to be short-lived.
"Given how markets have reacted to recent data, it certainly seems likely that the stock market would remain under fire," he said.
- So much for the calm -
Earlier, analysts had noted the return of some semblance of calm to the markets following the recent volatility.
In Asia, Hong Kong's main stocks index had closed up more than two percent, extending a rebound from the sell-off last week.
Tokyo, however, fell to another four-month low as the yen strengthened against the dollar, at one point hitting a 15-month high.
Investors were also unimpressed by weaker-than-expected economic data for Japan in the last quarter of 2017.
In Europe, the continent's biggest economy, Germany, expanded by 0.6 percent in the final quarter of last year, official data showed.
Global stock markets have tumbled in recent weeks, wiping out previous strong gains, largely on concerns that high US inflation will force the Federal Reserve to tighten the cost of borrowing faster than anticipated this year.
"Given the recent stock market slump, risk aversion has grown," Shinichiro Kadota, foreign exchange strategist at Barclays Securities, told AFP.
In corporate activity, shares in pan-European TV giant Sky rallied after the satellite broadcaster beat rival BT to show the bulk of live Premier League football matches in Britain over the next few years.
As global stock markets rose, the dollar lost ground against its peers in the European afternoon, having started the session higher, while bond yields rose.
- Key figures around 1640 GMT -
New York - DOW: UP 0.2 percent at 24,691.36 points
London - FTSE 100: UP 0.6 percent at 7,213.97 (close)
Frankfurt - DAX 30: UP 1.2 percent at 12,339.16 (close)
Paris - CAC 40: UP 1.0 percent at 5,165.26 (close)
EURO STOXX 50: UP 0.9 percent at 3,369.80
Tokyo - Nikkei 225: DOWN 0.4 percent at 21,154.17 (close)
Hong Kong - Hang Seng: UP 2.3 percent at 30,515.60 (close)
Shanghai - Composite: UP 0.5 percent at 3,199.16 (close)
Euro/dollar: UP at $1.2410 from $1.2311
Pound/dollar: UP at $1.3967 from $1.3841
Dollar/yen: DOWN at 106.92 yen from 107.14 yen
Oil - Brent North Sea: UP 39 cents at $63.12 per barrel
Oil - West Texas Intermediate: DOWN 2 cents at $59.17