SHARES on Wall Street clawed back ground yesterday as world markets’ nerves steadied despite worse than expected US inflation data viewed as a guarantee of a further rise in American interest rates at the end of this month.

Confounding fears that disappointing inflation news could trigger a fresh slump in US shares, investors largely brushed aside the sharpest rise in underlying inflationary pressures in the American economy for 15 months.

“Core” US consumer prices, excluding the volatile cost of fuel and food, rose by a hefty 0.3 per cent in May for a third month in a row, pushing the annual rate of core inflation up to 2.4 per cent, its worst since February 2005.

The increase in overall consumer prices last month was even sharper, at 0.4 per cent, boosting the annual headline US inflation rate to 4.2 per cent last month, from 3.5 per cent in April.

The strength of the data was seen as leaving a further US rate rise on June 29 a racing certainty. In spite of this, however, Wall Street rebounded from Tuesday’s heavy losses. The Dow Jones industrial average rose almost 70 points by early afternoon. In London, the FTSE 100 index closed modestly lower.

Leading institutions are continuing to bet, meanwhile, that the steep losses in stock markets worldwide will prove short-lived.

A Reuters poll of equity strategists worldwide showed most forecasting that equities in the US, Europe and Japan will all rebound and notch up double-digit gains between now and the end of the year.

Strong corporate profits and attractive valuations were tipped as providing a foundation for shares to revive.

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