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Written by Amanda Cooper
LONDON (Reuters) – Global stocks edged higher on Tuesday ahead of U.S. inflation data confirming the timing of a Federal Reserve interest rate cut, while Japanese officials warned of an imminent policy shift by the central bank. The yen fell as expectations weakened.
Gold remained just below its all-time high and the dollar edged higher as traders awaited the release of the U.S. Consumer Price Index (CPI).
The MSCI All World Index rose 0.1%, boosted by overnight gains on Wall Street and gains in Asian tech stocks.
Investors are pricing in at least three rate cuts from the Fed this year, likely starting in June. Analysts said Tuesday’s CPI data could shake up those expectations.
Strategist Jim Reid said Deutsche Bank expects the CPI to rise 0.4% on a monthly basis, which would keep the annual rate at 3.1%, while the core rate would rise 0.3%. He said it was expected.
“If that happens, it will be the fourth consecutive month that core CPI has been +0.3% or +0.4%, but it’s still a little too early for the Fed to feel comfortable,” he said.
U.S. stock index futures rose 0.2-0.4%, signaling a subsequent rally at the opening bell, while in Europe the STOXX 600 rose 0.4%.
A majority of economists in the latest Reuters poll also expect the Fed to start cutting interest rates in June. The survey showed that more respondents expected a change in Fed policymakers’ interest rate outlook at the March meeting to signal fewer rate cuts, rather than fewer cuts for the year as a whole. It was done.
The yield on the 10-year U.S. Treasury note fell slightly to 4.094%, but the dollar index, which measures the U.S. currency’s performance against six other currencies, rose slightly to 102.82 from a nearly two-month low of 102.33 last week. .
circle returns under pressure
In the foreign exchange market, the yen fell against the dollar after Bank of Japan Governor Kazuo Ueda gave a slightly harsher assessment of the Japanese economy than in January.
The move dampened some optimism that the central bank could end its negative interest rate policy at this month’s board meeting and weighed on the Japanese currency, with the dollar rising 0.3% to 147.38. It became yen.
A growing number of Bank of Japan policymakers are becoming open to the idea of ending negative interest rates this month, four sources familiar with the bank’s thinking told Reuters last week. Changes in expectations have contributed to the yen’s rise over the past week.
Futures markets currently have a 47% chance that the Bank of Japan will change its policy rate to zero at its March 18-19 meeting, but some traders may still wait until the April 26 meeting. I think there is.
“The question for investors is whether the BOJ will stop at lifting negative interest rates or start a tightening cycle,” Frank Benjimura, head of Asian equity strategy at SocGen, said at the Reuters Global Markets Forum. .We think it’s the former.”
Meanwhile, the pound fell 0.1% to $1.279 after data showed UK wage growth was slightly slower than expected last month, putting some pressure on the Bank of England to cut interest rates sooner. It fell.
Elsewhere, Chinese stocks rose, with Hong Kong’s Hang Seng index up 3.1% led by the tech sector and the blue-chip CSI300 index up 0.23%.
Spot gold fell 0.4% to $2,174 an ounce, but is still within sight of last week’s all-time high of $2,194.99.
(Additional reporting by Ankur Banerjee in Singapore and Anisha Sircar in Bengaluru; Editing by Jan Harvey and Mark Potter)
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