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Global equities declined slightly on Thursday as a pullback in oil prices due to rising inventories dampened investor enthusiasm while the dollar rose as data revived confidence in the U.S. economy.
Major U.S. equities indexes were little changed. The S&P 500 .SPX was pressured by a 1.8 percent drop in energy shares .SPNY. Brent crude .LCOc1 was down 1.4 percent and U.S. crude CLc1 fell 1.9 percent.
U.S. consumer prices in January posted their biggest drop since 2008 as gasoline prices continued to tumble, but underlying inflation rose modestly.
The MSCI All-Country World equity index .MIWD00000PUS was down 0.13 percent after having hit a record high of 434.40 points earlier in the trading day.
The dollar rose to a one-month high against a basket of currencies after the rise in core inflation and data showing a rise in U.S. durable goods orders supported bets that the Federal Reserve will raise interests rates in the middle of the year.
The president of the San Francisco Fed, John Williams, in an interview on Fox Business Network on Thursday, said the Fed will probably start raising interest rates "sometime this summer, or this fall" as inflation bottoms out and begins to recover.
The comments followed congressional testimony by Fed Chair Janet Yellen, this week, that the U.S. central bank would consider rate hikes on a "meeting-by-meeting" basis.
Thursday's data showing a rise in the core inflation reading, which excludes volatile food and energy costs, was a key driver in currency markets.
"It undermined the view that there's domestic disinflation. It's more an international story about falling prices in goods and commodities," said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.
U.S. Treasuries prices edged lower on Thursday as debt investors also focused on the inflation data, which failed to bolster the case for dovish Federal Reserve policy, and as incoming supply weighed on prices. [ID:nL1N0W01WV]
The Dow Jones industrial average .DJI fell 3.41 points, or 0.02 percent, to 18,221.16, theS&P 500 .SPX lost 0.95 points, or 0.04 percent, to 2,112.91, and the Nasdaq Composite.IXIC added 18.63 points, or 0.38 percent, to 4,985.77.
In Europe bond yields sank to fresh lows as investors positioned for an extended era of cheap money ahead of the European Central Bank's looming bond-buying scheme.
Central banks' battle to keep cash flowing into the financial system to avert a deflationary spiral has driven core European government bond yields into or close to negative territory. German seven-year bond yields on Thursday fell below zero for the first time.
The pan-European FTSEurofirst 300 .FTEU3 closed up 1 percent. Greek equities .ATG fell 2 percent, with the country's fate in focus after it said on Wednesday that it would struggle to make debt repayments to the International Monetary Fund and the European Central Bank this year.
The Russian rouble RUB= strengthened against the dollar for a third straight day but pared gains as the day went on and oil prices fell. The euro fell 1.5 pct against the dollar.
Gold prices rose 0.38 percent, rallying for a second day on expectations that the Fed would push its interest rate hike.
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