Rising inflation around the world weighed on stock markets Friday as investors wondered how fast central banks will raise borrowing costs to counter the threat of rising prices, while the euro was undermined by ongoing worries that Greece will have to restructure its massive debts.
Figures Friday reinforced market expectations that both the European Central Bank and the People's Bank of China will soon be raising interest rates again to counter rising inflation.
In China, figures showed consumer prices rose 5.4 percent in the year to March, up from February's 4.9 percent. The increase was largely driven by surging food costs and represents a setback for the government, which has boosted interest rates four times since October to cool prices.
Analysts expect the People's Bank to enact further measures in the days to come in response to those figures.
They also think that the ECB will raise rates again in June after figures showed inflation in the 17-country eurozone revised up to 2.7 percent in the year to March from the preliminary estimate of 2.6 percent, largely because of rising fuel costs.
The increase is likely to cause some concern for rate-setters at the European Central Bank, who are tasked with keeping inflation "close to but below" 2 percent. Last week, the European Central Bank raised its benchmark rate by a quarter of a percentage point to 1.25 percent, its first increase in nearly three years, because of concerns of rising inflation rates.
The euro failed to make much headway considering the inflation numbers as the currency was dogged by mounting concerns that bailed-out Greece will end up having to restructure its debts. Another credit rating downgrade of Ireland by Moody's also stoked concerns that Europe's debt crisis still has a way to play out.
By late morning London time, the euro was 0.3 percent lower on the day at $1.4455.
"The eurozone debt and banking crisis is back on the agenda and it looks as if EU policymakers will be eventually forced to consider debt restructuring as well as bank recapitalisation otherwise the problem will continue to fester," said Neil MacKinnon, global macro strategist at VTB Capital.
Those debt crisis concerns have not hit the euro too hard over the past few weeks, as investors have been more focused on the ECB's interest rate policy. Earlier this week, it jumped above $1.45 for the first time in 15 months.
Many analysts think that interest rates will remain the main driver of the euro's fortunes for a while yet, especially as the Fed is not expected to start raising rates anytime soon _ that means investors see the prospect of bigger and rising returns if they hold the euro.
The theme of rising inflation around the world will continue through Friday as attention turns to U.S. numbers for March. These are expected to show consumer prices rose by 2.6 percent in the year to March, up from the previous month's 2.1 percent.
However, unlike the People's Bank of China and the European Central Bank, the U.S. Federal Reserve is not anticipated to start increasing interest rates anytime soon, partly because it has a dual mandate of looking at the jobs market as well as prices.
There's a whole host of other U.S. economic data later to keep investors interested, including the monthly Empire State survey of manufacturing conditions around the New York region and the University of Michigan's latest assessment of consumer confidence.
Ahead of that U.S. data flood, stocks have traded in fairly narrow ranges.
"Further direction will be provided by a whole host of indicators due later in the day," said Ben Critchley, a sales trader at IG Index.
In Europe, the FTSE 100 index of leading British shares was up 0.2 percent at 5,974.44 while Germany's DAX rose 0.4 percent to 7,174. The CAC-40 in France was down 0.2 percent at 3,965.
Wall Street was poised for a modest retreat at the open though that could change in the wake of the data _ Dow futures were down 0.2 percent at 12,203 while the broader Standard & Poor's 500 futures fell a similar proportion to 1,308.
Earlier in Asia, Hong Kong's Hang Seng Index fell less than 0.1 percent to close at 24,008.07.
Despite the inflation figures, China's Shanghai Composite Index staged a late rally to finish 0.3 percent higher at 3,050.53.
Japan's Nikkei 225 stock average fell 0.7 percent to end at 9,591.52 while South Korea's Kospi ended down less than 0.1 percent to close at 2,140.50.
Benchmark oil for May delivery fell 43 cents to $107.68 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.00 to settle at $108.11 per on Thursday.
Kelvin Chan in Hong Kong contributed to this report.