Global stock markets had a rollercoaster ride on Thursday after initially slumping into the red, and then dramatically recovering, after US inflation came in above expectations for September.

In London, the FTSE 100 (^FTSE) ended almost 0.4% higher on the day, making up some of its losses after plunging to an 18-month low in the previous session. Meanwhile the CAC (^FCHI) rose 1.1% in Paris, and the Frankfurt DAX (^GDAXI) was 1.5% higher.

It came as the US consumer price index (CPI) stood at 8.2% last month, down from 8.3% in August but higher than economists had expected.

Core CPI, which strips out volatile food and energy components, jumped to 6.6% over the period, higher than forecast, and the highest since 1982. This is a key indicator of how price rises have become embedded across the economy.

Read more: Stock futures sink as inflation report comes in hotter than expected

"The fact that the core rate remains well over 6% demonstrates that inflation pressures are still broad-based and there seems little prospect of the Federal Reserve toning down its hawkish rhetoric at this stage," Richard Carter, head of fixed interest research at Quilter Cheviot, said.

“Despite cooling off slightly, inflation remains high and we would therefore expect to see another 0.75% interest rate hike at the next meeting and for the Federal Funds rate to be close to 4.5% by year-end. Investors continue to pray for a Fed pivot, but they may need to be patient.”

On the FTSE, housebuilders were amongst the biggest fallers on the day due to recent signs of slowing house prices.

Michael Hewson of CMC Markets said: “It was another disappointing session for the FTSE 100 yesterday as the UK blue chip closed at an 18-month low, dragged lower by a sharp fall in banks and house builders as a result of a sharp rise in long term [bond] yields,”

“This rise in yields has been driven over concerns about the fiscal plans of the UK government as well as the prospect of a bumper rate hike by the Bank of England in November.”

It also came as a report from the Royal Institution of Chartered Surveyors (RICS) said that UK homeowners will struggle to make mortgage repayments and repossessions will rise next year.

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Across the pond on Wall Street, the S&P 500 (^GSPC) surged 1.6% after opening lower, and the tech-heavy Nasdaq (^IXIC) was 1.4% ahead by the time of the European close. The Dow Jones (^DJI) advanced 1.8%.

Richard Flynn, managing director of Charles Schwab UK, said the Federal Reserve is now guaranteed to take aggressive action next month.

"The pace of inflation remains stubbornly high, in defiance of the Fed’s attempts to tamp down the economy by tightening monetary policy," he said.

"Rising prices, combined with last month’s stronger than expected jobs report, all but guarantee the Fed will enact its fourth 0.75pc rate hike when officials next meet in November."

Read more: How record high US inflation can hit UK markets, the pound, and 'Trussonomics'

It came after a sixth consecutive decline for the S&P 500 on Wednesday, which fell to the lowest level since November 2020.

Bond yields remained depressed on Thursday as investors weighed the risks of global recession amid a hawkish Federal Reserve and uncertainty about the Bank of England's commitment to stabilising markets.

Watch: Lawmakers target Federal Reserve over inflation as prices rise

Recession concerns also fuelled concerns about demand for oil, with crude prices (BZ=F) hovering around 0.4% higher after the previous day's 2% fall.

"It feels like the markets are feeding hungrily on any scraps of good news and even the merest hint inflation is cooling would likely be taken as a sign that, despite the US Federal Reserve’s earnest protestations, the tide is about to turn on interest rates," Russ Mould of AJ Bell said.

"Investors probably shouldn’t hold their breath given the trend in core inflation suggests higher prices are proving as sticky as toffee."

Read more: Bank of England warns UK households may face 2008 financial crisis mortgage strain

Asian stocks followed Wall Street lower overnight, with the Nikkei (^N225) down 0.6% while the Hang Seng (^HSI) fell 1.6% in Hong Kong, and the Shanghai Composite (000001.SS) fell 0.3%.

The yen crept back from a fresh 24-year low that has put traders on watch for intervention from Japan.

Watch: How does inflation affect interest rates?