The European STOXX 600 index rose 0.3%, with the London and Paris stock exchanges climbing 0.2% and 0.4% respectively.
Banks and auto stocks advanced, although data showed German retail sales fell more than expected in April as consumers felt the brunt of higher prices.
Soaring food and energy prices pushed inflation in the euro zone to a record high of 8.1% in May, data showed on Tuesday, stoking fears of rate hikes not only in Europe, but also worldwide.
The Bank of Canada is the latest central bank to raise interest rates, with economists forecasting a 1.0% to 1.5% increase later Wednesday.
Market participants were watching whether attempts by central banks around the world to rein in inflation with tighter monetary policy would trigger recessions – which could lead to a slower pace of rate hikes.
“It’s just an incredibly uncertain environment right now,” said Mike Bell, a global market strategist at JP Morgan Asset Management. “In due time, it makes sense to moderate the size of his risk positions.”
Investors also worried, Bell said, whether an EU agreement on an embargo on imports of Russian crude oil would lead to retaliation from Moscow. The ban aims to halt 90% of Russian crude imports into the 27-nation bloc by the end of the year.
The Stock Exchange should echo the gains made in Europe. S&P 500 futures were up 0.4%, strengthening in London exchanges.
The MSCI World Equity Index, which tracks stocks from 50 countries, was flat.
Earlier, Shanghai emerged from a two-month lockdown, but data showed a sharp decline in industrial activity across Asia due to weakening demand from China, relief in the region was short-lived. hard.
MSCI’s broadest index of stocks in the Asia-Pacific region outside Japan fell 0.4%, dragged down by Hong Kong’s Hang Seng index.
Eurozone bond yields fell in early trade after rising on Tuesday on eurozone inflation data, which came in much higher than expected.
As global inflation concerns rekindle, the US dollar hit a two-week high against the yen, supported by rising Treasury yields. The dollar halted a three-week slide and hit a two-week high of 129.23 yen.
The Dollar Index, which measures the currency against six major currencies, including Japan’s, rose 0.2% to 102.05, extending a 0.4% rise since Tuesday.
GYRATIONS
The US Federal Reserve begins to reduce assets accumulated during the pandemic on Wednesday. Traders are expecting her to raise rates by 50bp in meetings this month and next month and they are uncertain and increasingly worried about what happens next.
St. Louis Federal Reserve Chairman James Bullard and New York Fed Chairman John Williams are also due to speak on Wednesday and will be watched for clues on the outlook.
“We’re in this sort of twilight zone where it’s very hard to know what the Fed is going to do after the July meeting,” said Bank of Singapore analyst Moh Siong Sim.
“Depending on who says what and how the deal plays out, there will be a lot of gyrations over the next few weeks.”
In commodity markets, oil prices rose slightly after the EU agreed to a partial and phased ban on Russian oil and the end of Shanghai’s COVID-19 lockdown. [O/R]
Brent crude oil futures rose 0.3% to $115.95 a barrel.