Stock markets recovered from an initial battering on Wednesday, some upbeat signals from Britain and Japan helping offset what for many investors is a worrying revival of expectations for rises in U.S. interest rates this year.

The dollar, hammered by a virtual abandoning of expectations for tighter rates this year, hit three-week highs after Atlanta Federal Reserve President Dennis Lockhart and other officials on Tuesday played up chances of hikes this year.

Any shift towards more tightening would be bad news for stock markets, which have been comforted by the idea there would be no squeeze on the funds and companies that have borrowed and invested trillions of dollars globally over the past decade.

Asian markets fell broadly on that view, with Hong Kong and China down around 1.5 percent . European markets were steady to slightly lower while Wall Street was set to open flat.

"A barrage of comments from regional Fed presidents has forced rate markets to begin pricing more chance of Fed tightening in the coming months," analysts from French bank BNP Paribas said in a morning note.

"The shift supports the dollar and this adjustment could conceivably have quite a bit further to go."

Data on Tuesday showed the biggest rise in U.S. consumer prices in more than three years in April as gasoline prices and rents rose, while other data showed housing starts and industrial production rebounded strongly. Deutsche Bank credit strategist Jim Reid suggested the U.S. central bank was for the moment just keeping its options open.

"There's still a clearly large gap between where the market is and the recent rhetoric from the Fed," he said. "Importantly we're yet to hear from either the Fed President (Janet) Yellen or Vice-Chair (Stanley) Fischer recently." Fischer is due to speak publicly on Thursday, Yellen not until next week.