Global share markets put brake on ahead of inflation data

LONDON — Global markets were in cautious mode on Monday with Wall Street marking time while major European stock markets put the brake on following a record run last week as investors wait on key US inflation data.

London, Paris and Frankfurt ended marginally down after finishing at all-time highs on Friday.

On Wall Street, the Dow was flat more than two hours into the session while the broad-based S&P 500 and the tech-heavy Nasdaq were barely in the green on the eve of inflation figures that will influence interest-rate decisions.

World markets rallied last week on optimism that the US Federal Reserve, the European Central Bank and the Bank of England will soon cut borrowing costs after raising them in efforts to contain soaring prices.

Investors will pore over two sets of US inflation data for April — the producer price index on Tuesday and the consumer price index on Wednesday — for fresh clues about the Fed's monetary policy outlook.

"This week's US inflation updates are likely to be the drivers of equity market direction," said David Morrison, senior market analyst at Trade Nation.

"If the numbers suggest that inflation is continuing to push higher, then that will decrease the probability of rate cuts this year," he said.

An uptick in inflation in recent months has dented hopes that the Fed will start cutting rates as soon as June, and odds-makers now see the possibility of it happening in September.

This week's figures "will provide substantial insights into the likely duration of elevated interest rates," said Fawad Razaqzada, analyst at City Index and Forex.com.

Briefing.com analyst Patrick O'Hare said investors will also closely track retail sales figures, due out Wednesday, and quarterly earnings from Home Depot and Walmart.

"All of that, in turn, will fold into what the market thinks it can expect from the Fed in terms of future rate cuts," O'Hare said.

US-China trade war 

In Asia, indices also fluctuated as traders absorbed weak Chinese data and news that Beijing planned to start selling the first batch of almost $140 billion of bonds to boost the stuttering economy.

The week began on a tepid note after figures showed a drop in a broad measure of credit in China that sparked worries of a further slackening in the world's number two economy.

That came as The Wall Street Journal reported that the White House is looking at almost quadrupling tariffs on Chinese electric vehicles as part of a plan that will also target batteries and solar cells.

A decision, expected on Tuesday according to reports, would come as US President Joe Biden gears up for a rematch with Donald Trump in November's presidential election.

Last month, Biden urged a tripling of tariffs on steel and aluminium as he courted blue-collar voters.

In London, meanwhile, an announcement by Australian mining giant BHP that British rival Anglo American has rejected an "improved" takeover bid worth £34 billion ($43 billion) as it aims to create a copper titan left the latter's share price off 2.4 per cent.

BHP, whose chief executive Mike Henry said a deal would prove a "win-win for BHP and Anglo American shareholders" shed 0.6 per cent.