Portugal Colonial - European stocks rebound from losses

European and US stocks had tumbled on Tuesday after data showed that US inflation slowed less than expected in January, dealing a hefty blow to hopes of an early Federal Reserve interest rate cut and sending Asia indices mostly lower on Wednesday.

"UK inflation data today has offset some of those fears" over delayed cuts on both sides of the Atlantic, Craig Erlam, analyst at OANDA trading group, told AFP.

London's FTSE 100 index gained 0.9 percent after official data showed UK inflation held at 4 percent in January -- which undershot expectations but was double the Bank of England's target.

"It's all about progress towards the goal of two percent inflation and (interest) rates falling -- and today is another encouraging step toward that," Erlam added.

The fading prospect of a dovish turn by the Fed sent the dollar surging against the yen, forcing Japanese officials to warn they would intervene in foreign exchange markets to support the country's currency.

Expectations for a US rate cut have been doused in recent weeks by a series of strong indicators -- particularly on the economy and jobs -- while several monetary policymakers warned they want to see more data before shifting.

Tuesday's figures, however, showed the consumer price index and core prices eased less than expected, which came as a severe blow, leading investors to re-evaluate their outlook for rates this year.

Eyes were on US producer price data due at the end of the week.

All three main indices on Wall Street fell more than one percent on Tuesday, with the Dow and S&P 500 coming down from around record highs.

US Treasury yields jumped and the so-called "fear gauge" VIX rose at its fastest clip since October.

Asian traders ran for cover, with Tokyo, Sydney, Singapore, Seoul, Wellington, Mumbai and Bangkok well down on Wednesday.

Hong Kong rallied, however, as it reopened after an extended break for the Lunar New Year.

Tech giants led the way on hopes China's leaders will announce further measures to support the country's markets and stuttering economy.

- Key figures around 1115 GMT -

London - FTSE 100: UP 0.9 percent at 7,580.09 points

Paris - CAC 40: UP 0.4 percent at 7,657.39

Frankfurt - DAX: UP 0.2 percent at 16,913.98

EURO STOXX 50: UP 0.3 percent at 4,701.38

Tokyo - Nikkei 225: DOWN 0.7 percent at 37,703.32 (close)

Hong Kong - Hang Seng Index: UP 0.8 percent at 15,879.38 (close)

Shanghai - Composite: Closed for holiday

New York - Dow: DOWN 1.4 percent at 38,272.75 (close)

Euro/dollar: DOWN at $1.0698 from $1.0709 on Tuesday

Dollar/yen: DOWN at 150.66 yen from 150.80 yen

Pound/dollar: DOWN at $1.2542 from $1.2592

Euro/pound: UP at 85.29 pence from 85.04 pence

Brent North Sea Crude: UP 0.2 percent at $82.97 per barrel

West Texas Intermediate: UP 0.1 percent at $77.93 per barrel

G.M.Castelo--PC