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By Marc Jones
LONDON, Feb 15 (Reuters) - It was another day on inflation patrol for investors on Wednesday as stickier-than-expected U.S. data nudged stocks down and the dollar up, while a slowdown in Britain’s price rise rate sent the pound tumbling.
Asia had been largely focused on the read-across for global interest rates of Tuesday's 6.4% U.S. consumer inflation reading but Europe's moves were initially dominated by figures showing UK inflation easing to 10.1% from 10.5%.
It pushed the pound back under $1.21 versus the dollar and saw the biggest drop in 10-year UK Gilt yields in almost two weeks, albeit after two sizable rises in bond yields globally in the last few sessions.
Oil prices were dropping again, too, on demand worries , as were banking shares as one of Britain's biggest lenders, Barclays, saw its shares sink over 8% after it revealed a string of problems.
Gucci owner Kering also fell as much as 2% after its results, although 0.4%-0.5% gains in the tech and telecoms sectors, and by chemicals and auto firms, meant European stocks were little changed overall.
"Today’s UK inflation data will likely be met with sighs of relief," Hugh Gimber, a global market strategist at J.P. Morgan Asset Management, said referring to the Bank of England's rate setting committee.
Strong wage increase data this week, which posted the 12th consecutive month of stronger than anticipated growth, showed that inflationary pressures remain strong overall, however.
"We see interest rates of 4.5% as the minimum required to return inflation to target over the coming quarters," Gimber added.
Despite Europe's resilience, MSCI's 47-country world share gauge was 0.2% in the red with S&P 500 futures markets also pointing to Wall Street heading 0.3% lower later.
Headline U.S. consumer inflation came in at 6.4% year-on-year for January on Tuesday, a bit higher than the 6.2% economists had expected, setting off selling in the bond market and Fed funds futures as hopes that rates could be cut later this year grew dimmer.
Fed funds futures now imply a peak above 5.2% by mid-year and rates above 5% at year's end.
Two-year Treasury yields, which rise when the price of the underlying bond falls, steadied at 4.59% in Europe after climbing up to 4.61% overnight. It had also widened the premium or 'inversion' over 10-year rates - an unusual phenomenon that historically often signals an approaching recession.
SWIMMING IN OIL
Turkey's stock index rose almost 10% on Wednesday after it had been closed for five days in the wake of the country's devastating earthquake that has now claimed more than 40,000 lives in Turkey and neighbouring Syria.