LONDON, Jan 25 Reuters World stocks paused near fivemonth highs on Wednesday, as signs that central banks might need to keep hiking interest rates for longer dampened a recent wave of optimism that aggressive monetary tightening by big central banks was almost done.

Australia39;s dollar shot up to its highest in over five months after data showing inflation rose to a 33year peak of 7.8 last quarter bolstered the case for another interestrate hike from the Reserve Bank of Australia RBA next month.

Canada39;s central bank is widely expected to lift interest rates again later on Wednesday, with recent strong data supporting expectations for another move.

Trade in European stocks was lacklustre and the broad Euro STOXX 600 fell 0.4. U.S. stock futures pointed to a weak Wall Street open , .

Globally, stocks have posted strong gains this year after a rout in 2022, on expectations that inflation has peaked and that U.S. interest rate rises will taper off. The dismantling of COVID controls in China and the reopening of its borders have further boosted investor sentiment.

MSCI39;s world equity index, up more than 6 this month, was broadly steady near fivemonth highs.

Our view is that the move in risk assets is overdone, said Guy Miller, chief market strategist at Zurich Insurance Group.

Broadly speaking, the problem that we have is that economic conditions are getting worse and the data we are looking at points in that direction.

In Asia, MSCI39;s broadest index of…