European markets closed slightly higher on Wednesday as investors digested key inflation data from the U.S.
The pan-European Stoxx 600 index provisionally closed up 0.11%, trimming earlier gains.
European markets
Sectors were mixed, with media and industrial stocks both up around 0.75%, while travel and leisure stocks fell 1.9% and tech stocks shed 0.88%.
U.S. inflation rose 0.1% monthly and 5% annually in March, which was less than a Dow Jones forecast. Core inflation, excluding food and energy, increased 0.4% and 5.6% on an annual basis.
"The lower-than-expected number, while welcome, is unlikely to change the likelihood of another 25 [basis point] rate hike from the Fed in May, given that core prices edged higher," said Michael Hewson, chief market analyst in CMC Markets.
"On the margin, the initial reaction does suggest that markets think that any move in May could well be the last in the rate hiking cycle, ahead of possible cuts by the end of this year." It's that final part, Hewson continued, "where markets appear to be getting ahead of themselves, and this appears to have tempered some caution as we head into the close as markets retreat from their intraday highs."
Financial markets are pricing in around a 73% chance of a 25 basis point hike in May, according to CME Group's Fed Watch tool.
Investors are also digesting the International Monetary Fund's latest global growth report, released Tuesday, which included its weakest medium-term growth forecast for more than 30 years.
"We are concerned about what we have seen in the banking sector, particularly in the U.S. but maybe also in other countries, might do to growth in 2023," Pierre-Olivier Gourinchas told CNBC's Joumanna Bercetche in Washington, D.C.
U.S. stocks initially climbed before turning negative following the inflation reading.
European markets closed 0.6% higher Monday.