World shares edged up on Wednesday taking comfort from strong U.S. retail earnings even though the UK's highest inflation since 1982 and a rate hike in New Zealand reminded investors of the challenges facing the global economy.
MSCI's benchmark for global stocks was up 0.1% by 0829 GMT, extending its July recovery, although concerns over high inflation and policy tightening kept a lid on gains.
European shares were barely changed after a positive open. The MSCI's broadest index of Asia-Pacific shares outside Japan added 0.2%, off earlier highs.
Wall Street looked set for a weaker start after strong gains on Tuesday following stronger-than-expected results from Walmart and Home Depot which bolstered views on the health of consumers. S&P 500 futures were down 0.3%.
But British consumer price inflation jumping more than expected to 10.1% in July highlighted growing pressures on households while cementing expectations of another 50 basis point (bps) rate hike at the next Bank of England meeting.
After an initial spike on the data, sterling pared some gains and was last up 0.1% against the dollar.
"Higher inflation should trigger a more aggressive monetary policy response from the Bank of England - a bullish signal for sterling," said Matthew Ryan, Head of Market Strategy at Ebury.
"On the other hand, however, higher prices present a clear downside risk to economic activity, and raise the possibility of a potentially prolonged UK recession, which is clearly bearish for GBP," he added.
Shares in New Zealand were flat. After an initial spike the kiwi dollar turned negative after the country's central bank announced a fourth consecutive 50-bps rate hike without giving hints of slowing down.
The hike was in line with forecasts, but Imre Speizer, head of NZ market strategy at Westpac, said the tone of RBNZ's statement was more hawkish than expected.
"Clearly they're a bit more worried about wage inflation and a very tight labour market, that's been a big recent development," Speizer said.
In foreign exchange markets, the dollar index gained 0.15% to 106.64 ahead of the release of minutes from the Federal Reserve's latest meeting which investors will scrutinise for more clues on its policy tightening outlook.
The index, which tracks the greenback against six main peers, has recovered most of the ground it lost last week after a cooler-than-expected U.S. inflation reading but remains well off its mid-July top.
In Europe, yields rose as the UK inflation data shifted investors' focus back to potential further monetary tightening in the euro area. German 10-year bond yields rose 6 bps to 1.43%, their highest since July 22.
Ten-year Treasury yields rose 4 bps to 2.865%.
Oil prices stayed near 6-month lows as worries over a global economic recession lingered, although an unexpectedly large drop in U.S. stocks provided support earlier in the day.
Brent crude was down 0.3% at $92.06 a barrel while U.S. West Texas Intermediate crude was flat at $86.5.
Spot gold traded in a narrow range and was last down around 0.2% at $1,7712.5 an ounce.
(Reporting by Danilo Masoni and Sam Byford in Tokyo; Editing by Nick Macfie)