World shares cheer China data, as central banks line up

By Nell Mackenzie and Koh Gui Qing

NEW YORK/LONDON (Reuters) – Global stocks jumped on Monday while Treasury yields crept higher as investors looked ahead to a raft of central bank meetings this week that could see the end of free money in Japan and a blueprint for U.S. rate cuts this year.

By 1453 GMT, MSCI’s broadest index of stocks jumped 0.69%, helped in part by upbeat industrial output and retail sales data from China.

In the United States, the Dow Jones Industrial Average rose 0.36%, the S&P 500 gained 1.07%, and the Nasdaq Composite added 1.62%.

“The market focus is very much on the start of rate cuts. Not that the Fed is expected to cut at this meeting, but any clues Chair Powell might offer for when the first rate cut could come,” said Chris Low, Chief Economist at FHN Financial.

The U.S. Federal Reserve, which ends its policy meeting on Wednesday, is considered certain to keep rates at 5.25-5.5%, and investors mostly expect the Fed to begin cutting rates by June or July.

However, some analysts have warned of the possibility that the Fed might signal a higher-for-longer outlook on policy, given the stickiness of inflation at both consumer and producer levels.

“Recent U.S. data indicate gradual steps towards increasing inflation risks,” Dana Malas, a strategist at SEB Bank, said in a note.

“That the road to 2% would be straight is wishful thinking; setbacks are inevitable. Disinflationary forces are still stronger than inflationary pressures,” she said.

The probability of a U.S. rate cut as early as June has dropped to 56%, from 75% a week earlier, and the market has only 72 basis points of easing priced in for 2024 compared to more than 140 basis points a month ago.

This sent two-year Treasury yields up to 4.734%, after they climbed 24 basis points last week, while 10-year yields stood at 4.332%. [US/]

The Fed is also expected this week to start talking about how it might slow the pace of its bond sales, perhaps halving it to $30 billion a month.

A number of other central banks including in Japan, Britain, Switzerland, Norway, Australia, Indonesia, Taiwan, Turkey, Brazil, and Mexico also meet this week and, while many are expected to hold steady, there is plenty of scope for surprises.

Tuesday could see Japan end the longest run of negative interest rates in history, after its companies decided on the biggest pay hikes in 33 years.

However, there is a chance the Bank of Japan might wait for its April meeting, given it will be issuing updated economic forecasts then.

The Japanese yen weakened 0.12% versus the greenback to 149.21 per dollar by late morning, while the euro was little changed at $1.0885.

Earlier in the day, Asian markets closed higher after Chinese data beat expectations.

Japan’s Nikkei closed up 2.7%, while Shanghai’s blue chip index finished up about 1%.

ACROSS THE POND

European stocks gave up earlier gains and the pan-European STOXX 600 index lost 0.26% by 1515 GMT.

The Bank of England meets on Thursday and is expected to keep rates at 5.25% as wage growth cools, while markets see some chance the Swiss National Bank might ease this week.

The ascent in the dollar and yields has taken little shine off gold, which rose 0.1% to $2,158.56 an ounce, having fallen 1% last week and away from all-time highs. [GOL/]

Oil prices have had a better run after the International Energy Agency raised its view on 2024 oil demand, while the supply outlook was clouded by Ukrainian strikes on Russian oil refineries. [O/R]

U.S. crude recently rose 0.93% to $81.79 per barrel and Brent was at $86.00, up 0.77% on the day. [O/R]

(Reporting by Nell Mackenzie; Editing by Kim Coghill, Susan Fenton, Mark Potter and David Evans)

Jessica Weisman-Pitts