Markets mainly rise as traders jockey before US inflation data

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Equities mostly rose Wednesday as traders awaited key US inflation data that could have a bearing on Federal Reserve interest rates, and on the eve of a European Central Bank's latest monetary policy decision.

While markets reacted positively to last week's blockbuster US jobs report, which pointed to a still-strong economy, there is a nervousness on trading floors that a third successive miss to the upside on consumer prices could force the Federal Reserve to delay cutting borrowing costs.

"Having shown signs of nervousness at the start of the week, investors have got more into the groove as we approach the publication of US inflation," said AJ Bell investment director Russ Mould.

"The figures could still knock markets off course, particularly if they come in higher than expected."

The European Central Bank, buoyed by slowing inflation, is expected to keep eurozone borrowing costs on hold one last time Thursday while laying the ground for a first interest rate cut in June.

Wednesday's US consumer price index (CPI) data may provide clues over whether the Fed could also begin to lower interest rates starting in the same month.

"US inflation... is expected to tick higher to 3.4 percent year-on-year in March, up from 3.2 percent in February," noted City Index analyst Fiona Cincotta.

"Hotter than expected inflation data could raise concerns over the persistent nature of inflation and support the view the Fed will need to keep rates high for longer," she warned.

At the start of this year investors expected the Fed could make six rate cuts this year. Those expectations are now down to three at most, with some even contemplating zero.

Some observers, however, have suggested that no rate cuts could be the price to pay for economic health and strong earnings.

Atlanta Fed boss Raphael Bostic sounded a pragmatic note Tuesday when asked about the bank's plans. He repeated his view that it would make one reduction this year, but said he was open to changing his mind as the data came in.

Asian traders on Wednesday shrugged off a decision by Fitch to downgrade China's sovereign credit outlook to negative based on increased risks to the country's public finances.

Hong Kong surged 1.9 percent, boosted by a rally in tech firms including Tencent after Chinese authorities approved a number of overseas online games.

Sydney, Mumbai, Bangkok and Wellington were also in the green, though Shanghai and Taipei edged lower.

Tokyo fell as a stronger yen weighed on exporters. The currency picked up against the dollar following less-than-dovish comments from Bank of Japan boss Kazuo Ueda.

- Key figures around 1030 GMT -