Wall Street stocks gave up earlier gains after a sharp rise in oil prices helped reignite inflation fears, even after a crucial component of US inflation data came in less than expected.

The S&P 500 finished the day 0.3 percent lower, after rising 1.3 percent earlier on Tuesday. The heavy Nasdaq Composite was also down 0.3 percent.

Oil prices rose more than 6 percent, undermining the initial positive reaction to new US inflation data released on Tuesday morning.

Excluding price gains for volatile commodities such as food and energy sent the “core” US consumer price index up 0.3 percent on the month, less than the 0.5 percent forecast of economists polled by Reuters.

However, the main consumer prices rose 8.5 percent on an annual basis in March, up from 7.9 percent in February, the Bureau of Labor Statistics said, the fastest annual rise since 1981.

The lower headline inflation reading initially brought some relief to investors, who feared an inflation rally would increase pressure on the US Federal Reserve to tame price growth by rapidly raising interest rates – a prospect that has roiled global markets in recent months.

Jim Poulsen, chief investment analyst at The Leuthold Group, said the “much weaker” core inflation reading is expected to be unlikely to derail the Fed’s plans to aggressively raise interest rates at its next meeting in May.

The Federal Reserve last month raised its benchmark interest rate by a quarter of a percentage point, bringing the target range to 0.25 percent to 0.50 percent, in First increase since 2018.

In government debt markets, the yield on 10-year US Treasuries, which supports global borrowing costs, fell 0.06 percentage points to 2.72 percent. The yield on the two-year bond, which closely tracks interest rate expectations, fell further, indicating that investors readjusted their expectations for higher interest rates after the data was released.

The yield on German 10-year bonds, a proxy for European borrowing costs, fell 0.03 percentage point to 0.79 percent. The yield on government bonds was minus 0.12 percent at the beginning of the year.

German investor confidence, according to the Zew Research Institute’s economic sentiment index, has fallen to its lowest level since the first month of the coronavirus pandemic.

Elsewhere in the stock markets, the European Stoxx 600 index fell 0.4 percent, the German DAX fell 0.5 percent and the French CAC 40 index fell 0.3 percent. The FTSE 100 index in London fell 0.5 per cent. European bank stocks were among the worst performers, with shares in German lenders Deutsche Bank and Commerzbank down more than 9 per cent and 8 per cent, respectively.

Andrew McCaffrey, chief global investment officer at Fidelity International, said he was “particularly cautious” about European stocks and the euro given the “potential” of a recession.

In Asia, Hong Kong’s Hang Seng Index closed 0.5 percent higher, and China’s CSI 300 Index rose 1.9 percent. Japan’s Topix fell 1.4 percent and South Korea’s Kospi fell 1 percent.