European stocks made slim gains on Wednesday, with the dollar strengthening as investors fretted over soaring inflation and the hit on global growth from looming interest rate rises.

Europe’s STOXX 600 index (.STOXX) added 0.3%, with bourses in London (.FTSE) and Paris (.FCHI) climbing 0.2% and 0.4% respectively.

Banks (.SX7P) and auto (.SXAP) stocks gained, though data showed German retail sales fell by more than expected in April as consumers feel the pinch of higher prices. read more

Soaring food and energy costs drove euro zone inflation to a record-high 8.1% in May, figures on Tuesday showed, stoking concern about rate rises not just in Europe but globally. read more

The Bank of Canada is the latest central bank set to hike interest rates, with economists expecting an increase to 1.5% from 1.0% later on Wednesday. read more

Market players were watching whether attempts to douse inflation by central banks across the world with tighter monetary policy would spark recessions – something that could in turn see rate hikes slow.

“It’s just an incredibly uncertain environment at the moment,” said Mike Bell, a global market strategist at J.P. Morgan Asset Management. “In times like that, it makes sense just to moderate the size of one’s risk positions.”

Investors were also concerned, Bell said, about whether a European Union agreement on an embargo on Russian crude oil imports would see retaliation from Moscow. The ban aims to halt 90% of Russia’s crude imports into the 27-nation bloc by year-end. read more

Wall Street was set to echo gains in Europe. S&P 500 futures were last up 0.4%, strengthening in London trade.

The MSCI world equity index (.MIWD00000PUS), which tracks shares in 50 countries, was flat.

Earlier, Shanghai emerged blinking from two months of lockdown but as data showed steep falls in factory activity across Asia from the withering of China’s demand, relief in the region was short-lived. read more

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.4%, dragged down by Hong Kong’s Hang Seng index (.HSI).

Euro zone bond yields dipped in early trade following a surge on Tuesday after the bloc’s inflation data came in much higher than expected.

As worries over global inflation flared anew, the U.S. dollar rose to a two-week high versus the yen, buoyed by higher Treasury yields. The dollar has arrested a three-week slide and hit a two-week high of 129.23 yen .

The dollar index which measures the currency against six major peers, including Japan’s, rose 0.2% to 102.05, extending a 0.4% rally from Tuesday.

The U.S. Federal Reserve begins shrinking asset holdings built up during the pandemic on Wednesday. Traders expect it will raise rates by 50 bps at meetings this month and next and they are unsure and increasingly worried about after that.

St. Louis Federal Reserve President James Bullard and New York Fed President John Williams are also due to speak on Wednesday and will be watched for clues on the outlook.

“We’re in this kind of twilight zone now where it’s just very difficult to get a handle on what the Fed are going to do after the July meeting,” said Bank of Singapore analyst Moh Siong Sim.

“Depending on who says what and how the data plays out there will be a lot of gyrations over the next few weeks.”

In commodity markets, oil prices inched higher after the EU agreement on a partial and phased ban on Russian oil and as Shanghai’s COVID-19 lockdown ended.

Brent crude futures were up 0.3% at $115.95 a barrel.