World stocks mixed ahead of US inflation, metals soar

By Tom Westbrook and Samuel Indyk

LONDON (Reuters) -Global shares were mixed on Tuesday ahead of this week’s U.S. inflation data and a crucial European Central Bank meeting, while industrial metals prices extended recent gains on expectations of a worldwide manufacturing rebound.

The pan-European STOXX 600 index fell 0.2%, while futures on Wall Street were muted.

“Stock markets seem to be in a holding pattern at the moment and I think that will continue until we get more clarity on inflation and the state of the economy,” said Dan Boardman-Weston, CIO at BRI Wealth Management.

“Markets are waiting to see what the inflation print is and how that changes expectations for rate cuts going forward.”

Expectations for U.S. rate cuts have been receding this year on the back of robust economic activity and sticky inflation.

Traders are now pricing about 62 basis points (bps) of cuts from the Federal Reserve in 2024, implying around two or three quarter-point cuts, down from around 150 bps at the start of the year.

“For now at least, the main theme has been the continuation of last week’s trends, including more and more doubts about rate cuts this year, and growing fears about inflation,” Deutsche Bank strategist Jim Reid said.

It is a similar story in Europe, where the focus is on Thursday’s ECB policy announcement, with markets expected to scour comments from President Christine Lagarde for hints that rates could be cut in June.

Germany’s 10-year bund yield, the euro area’s benchmark, dipped to 2.397% on Tuesday after touching a three-week high of 2.457% the day before, while the euro held firm at $1.0868.

The yen, meanwhile, continues to face heavy pressure as investors see any lags in global rate cuts as leaving the gap wide with Japan’s near-zero interest rates.

At 151.81 per dollar, the yen is a whisker from last month’s 34-year low of 151.975. Against the euro, the yen is at its weakest for 2-1/2 weeks at 165.

Japanese Finance Minister Shunichi Suzuki said authorities would not rule out any options in dealing with excessive yen moves, repeating his warning that Tokyo is ready to act against the currency’s recent sharp declines.

“We expect (Japan) to intervene above 152, but not immediately on a break,” Standard Chartered strategist Steve Englander said in a note to clients.

METALS FLY

Meanwhile, industrial metals prices extended their gains on Tuesday amid expectations of a worldwide manufacturing rebound, while shares in the Asia-Pacific region rose.

MSCI’s broadest index of Asia-Pacific shares outside Japan increased 0.7%. Japan’s Nikkei 225 rose 1.1%. That left MSCI’s broadest gauge of global stocks up 0.1%.

In Shanghai, the most-traded May copper futures rose to a record high, while zinc and tin made multi-month peaks and aluminium traded just below Monday’s two-year top. [MET/L]

Even iron ore, battered by China’s property downturn, ended at its highest level since March 25. [IRONORE/]

“It’s pretty much a China bet,” said Vishnu Varathan, head of economics at Mizuho Bank in Singapore.

“It’s coincided with a global manufacturing bottoming, and I think that plays well into China’s industrial recovery. That aspect of it is a broader-based story for metals.”

On Monday, data showed German industrial production rose more than expected in February.

Last week, data showed U.S. manufacturing growing for the first time in one-and-a-half years. China’s manufacturing activity expanded for the first time in six months in March.

Meanwhile, spot gold hit a record high for the eighth session in a row, supported by central bank buying and heightened geopolitical tensions, according to analysts.

“I think the rally may continue in the short-term,” BRI’s Boardman-Weston said.

“There are a few reasons why it has moved up and I think it has legs behind it.”

(Reporting by Tom Westbrook and Samuel Indyk; Additional reporting by Mai Nguyen; Editing by Himani Sarkar, Mark Potter and Tomasz Janowski)