US stocks gave up ground Wednesday but remained near record highs, while London fell out of step with Europe on fears spiking inflation would prompt the Bank of England to raise interest rates.
The FTSE 100 index of top British shares was firmly in the red by the close of trading, lagging Paris and Frankfurt.
On Wall Street, all three major equity indices retreated, shrugging off good earnings from retailers and consolidating recent market records.
"This has been a week where we're trying to digest the gains we've had," said Art Hogan of National Securities, adding that there was no clear catalyst for the market's retreat.
The Dow Jones Industrial Average ended down 0.6 percent at 35,931.05. The blue-chip index is down 1.4 percent from its most recent record on November 8.
Major American retailer Target beat forecasts in third-quarter earnings published Wednesday, following strong data Tuesday from Walmart and upbeat consumer sentiment.
But statistics released Wednesday also showed falls in housing starts and mortgage applications in the world's biggest economy.
Oil prices sank further even though data showed US commercial crude stocks fell back, as traders considered the chances of Washington and Beijing releasing part of their strategic reserves -- a possibility discussed by presidents Joe Biden and Xi Jinping in a video summit Monday.
Across the Atlantic, data released early Wednesday showed UK annual inflation rose to a near decade-high of 4.2 percent in October on higher energy bills.
The news sent the pound jumping as traders priced in a December interest rate hike from the Bank of England, emboldened also by Tuesday's upbeat UK jobless data.
The data "now makes it odds-on that all the pre-Christmas headlines will be of the Bank of England steals Christmas variety, if they do bite the bullet and belatedly nudge rates higher," said CMC Markets analyst Michael Hewson.
Inflation leapt on higher prices for domestic electricity and gas, as well as motor fuel which faced shortages, the Office for National Statistics said.
Second-hand car prices are surging as a worldwide semiconductor shortage dents new vehicle production.
- Key figures around 2145 GMT -
New York - Dow: DOWN 0.6 percent at 35,931.05 (close)
New York - S&P 500: DOWN 0.3 percent at 4,688.67 (close)
New York - Nasdaq: DOWN 0.3 percent at 15,921.57 (close)
London - FTSE 100: DOWN 0.5 percent at 7,291.20 (close)
Frankfurt - DAX: FLAT at 16,251.20 (close)
Paris - CAC 40: UP 0.1 percent at 7,156.85 (close)
EURO STOXX 50: FLAT at 4,400.81 (close)
Tokyo - Nikkei 225: DOWN 0.4 percent at 29,688.33 (close)
Hong Kong - Hang Seng Index: DOWN 0.3 percent at 25,650.08 (close)
Shanghai - Composite: UP 0.4 percent at 3,537.37 (close)
Euro/dollar: UP at $1.1326 from $1.1320 at 2200 GMT
Pound/dollar: UP at $1.3493 from $1.3430
Euro/pound: DOWN at 83.91 pence from 84.29 pence
Dollar/yen: DOWN at 114.09 yen from 114.82 yen
Brent North Sea crude: DOWN 2.6 percent at $80.28 per barrel
West Texas Intermediate: DOWN 3.0 percent at $78.36 per barrel