Goldilocks fights back but bears still swinging

Traders betting on the Goldilocks scenario of a not-toohot, not-too-cold global economy came up against market bears again on Tuesday, with little sign yet of a winner emerging in their ongoing face-off.

Stocks see-sawed with solid gains in China and other Asian emerging markets offset by a tumble in Japan and then a red morning for most of Europe's bourses and Wall Street futures in New York.

Tokyo's 0.65 per cent fall had been compounded as the yen hit a five-month high amid a renewed bout of dollar weakness which had also helped lift bond and commodity markets after recent turbulence.

Copper, one of the industrial metals seen as a sensitive gauge of global economic health, climbed over 1.3 per cent , while Asia's overnight gains kept MSCI's 47-country world stocks index up 0.2 per cent despite Europe's subdued session.

"As long as we don't get dragged into (a US) recession the market tends to recover quite quickly," said Donough Kilmurray, Managing Director, Investment Strategy Group at Goldman Sachs, seeing only a 10 per cent chance of that this year.

Still, caution lingered in the broader markets following a US-led tumble in riskier assets last week and ahead of US inflation data on Wednesday. A stronger-than-expected reading on price pressures could trigger a fresh wave of selling.

There were niggling worries too about the trajectory of debt levels after US President Donald Trump on Monday moved back his own deadline for a balanced budget.

World markets' main 'fear gauge', the VIX volatility index was nudging higher again after two days of easing back.

The currency market remained choppy too. Britain's pound was jolted to a session high of $1.3924 after headline annual UK inflation came in at 3.0 percent, a tenth of a point above forecasts and holding close to its highest level in nearly six years.

The data highlighted the challenge the Bank of England faces as it tries to return price growth to target over the next two years.

The dollar's index against a basket of six major currencies fell over 0.5 per cent to 89.689 as the bears returned to give it its worst day of the month so far. Last week had been the greenback's best since 2016.

It was 1 percent lower against the yen at 107.600 yen , while the euro added 0.4 per cent to $1.2322 and the Swiss franc also made ground.

"It looks like for now markets are reverting back to the weaker dollar theme, but I think that remains dependent on risk appetite recovering," said TD Securities' European head of currency strategy Ned Rumpeltin.

"You have this lingering feeling of risk-off in some markets so it is really hard to find a consistent story."