LONDON: World shares firmed on Monday as investors braced for a busy run of inflation data that could set the scene for a European rate cut as soon as next week and a U.S. policy easing within just a few months.
Holidays in Britain and the United States made for thin trading ahead of Friday's figures on core personal consumption expenditures (PCE), the Federal Reserve's preferred measure of inflation.
MSCI's broadest index of stocks gained 0.2 per cent, having slipped 0.38 per cent last week and just shy of an all-time peak of over 796.
"The pathway to the Federal Reserve's 2 per cent target appears longer and more arduous than anticipated last year," Bruno Schneller, managing director at Erlen Capital Management, said.
Median forecasts expect this week will see a rise of 0.3 per cent in the PCE price index in April according to a Reuters poll, keeping the annual pace at 2.8 per cent, with risks on the downside.
U.S. economic recovery remains uneven, with sectors such as manufacturing showing signs of slowdown, while services remain resilient, Schneller told Reuters.
"This complex scenario likely delays any potential rate cuts to late 2024 or beyond, requiring continuous monitoring of incoming data to gauge the appropriate timing and pace of monetary policy adjustments," he added.
Figures for inflation in the euro zone are also due on Friday and economists believe an expected tick up to 2.5 per cent should not stop the European Central Bank from easing policy next week.
Policymakers Piero Cipollone and Fabio Panetta both flagged a coming cut over the weekend, while markets imply an 88 per cent chance of an easing to 3.75 per cent on June 6.
By Thursday, the ECB will enter a quiet period before its June 6 meeting, analysts at Societe Generale noted.
"Questions have been raised on how the latest wage data gel with the view that wage growth is easing, and we may hear more ECB speakers stressing that the 1Q data have been affected by temporary factors," their note said.
The Bank of Canada might also ease next week, while the Fed is seen waiting until September for its first move.
At least eight Fed officials are due to speak this week, including two appearances by the influential head of the New York Fed, John Williams.
The head of the Bank of Japan (BOJ) said on Monday it would proceed cautiously with inflation-targeting frameworks, adding that some challenges were "uniquely difficult" for Japan after years of ultra-easy monetary policy.
The BOJ holds its policy meeting on June 14 and there is some chance it may buck the global trend and hike rates again, albeit to a modest 0.15 per cent.
WAITING GAME
European stocks were subdued on Monday, with several major markets closed and investors taking a cautious stance ahead of this week's inflation data.
The pan-European STOXX 600 index was up 0.2 per cent at 1228 GMT. With the U.S. and UK markets closed on Monday, trading activity was light across the board.
S&P 500 and Nasdaq futures remained steady, as the market would next open on Tuesday. The Nasdaq hit record highs last week after Nvidia beat expectations.
In currency markets, attention was again centred on the yen and the risk of Japanese intervention ahead of the 160.00 level. The dollar stood at 156.84 yen, having added 0.9 per cent last week and close to its recent top of 160.245. Japan renewed its push to counter excessive yen falls during a weekend gathering of Group of Seven (G7) finance leaders, after a recent rise in bond yields to a 12-year high failed to slow the currency's decline.
The euro steadied at US$1.0850, and short of its recent top at US$1.0895.
Gold rose about 0.6 per cent to US$2,348 an ounce, having recoiled 3.4 per cent last week and off an al-time peak of US$2,449.89.
Oil prices were stuck near four-month lows amid concerns about demand, as the U.S. driving season gets underway this week. Investors are waiting to see if OPEC+ will debate new output cuts at an online meeting on June 2, though analysts doubt there will be a consensus for a move.
Brent was up 55 cents at US$82.67 a barrel, while U.S. crude rose 55 cents to US$778.27 per barrel. - Reuters