Japanese stocks outpace those of Europe and the United States ahead of key inflation data From Reuters

©Reuters. FILE PHOTO: An investor looks at a board showing stock information at a brokerage office in Beijing, China, October 8, 2018. REUTERS/Jason Lee/File Photo

By Harry Robertson and Ankur Banerjee

LONDON/SINGAPORE (Reuters) – Japanese shares hit a 34-year high on Tuesday, while European shares fell as investors awaited a report on U.S. inflation that could influence Federal Reserve policy.

Treasuries and the dollar were little changed before the inflation numbers. remained around $50,000 after crossing the threshold for the first time in over two years thanks to inflows into cryptocurrency-backed exchange-traded funds.

it rose to 38,010 on Tuesday, not far from the benchmark’s record high of 38,957 in 1989. It has gained more than 13% so far this year after rising 28% in 2023.

“U.S. yields have risen year to date,” said Max Kettner, chief multi-asset strategist at HSBC. “Absent any kind of significant tightening from the Bank of Japan that really hurts the Japanese yen, (which) helps the export-sensitive Japanese stock market.”

European shares slipped as investors turned cautious ahead of the US data, with the continental index falling 0.51% after rising 0.54% on Monday.

the stock index was 0.57% lower. It rose just short of an all-time high on Monday on improving investor sentiment led by hopes of interest rate cuts.

Futures for the United States fell 0.41%, while Nasdaq futures fell 0.69%. The S&P 500 index hit another intraday record above 5,000 on Monday, supported by rate cut bets and a handful of technology stocks.

“Markets have done well, so they are taking some money off the table ahead of what could be important data,” said Samuel Zief, head of global FX strategy at JPMorgan Private Bank.

100 slipped 0.29% as the pound rose to its highest since August against the euro after data showed wages growth was stronger than expected in the final three months of 2023.

US inflation data for January could rattle markets at 1.30pm GMT (8.30am ET). Economists polled by Reuters expect the consumer price index (CPI) to rise 2.9% year-on-year, down from 3.4% the previous month.

A higher-than-expected figure could push yields higher and further strengthen the dollar, said Charu Chanana, head of currency strategy at Saxo.

Market prices show that investors currently think there is a 70% chance of an interest rate cut by May, “and there appears to be room to push this further into June with markets remaining sensitive to surprises from hawk for now,” Chanana said.

Investors have reduced their bets on rate cuts by major central banks in recent weeks as US data came in stronger than expected. They now expect cuts of about 110 basis points by the end of the year, down from about 145 basis points in early February.

The yield remained unchanged at 4.166%. The, which measures the U.S. currency against six rivals, was little changed at 104.13, while the euro remained essentially flat at $1.0774.

The Japanese yen, which is sensitive to U.S. rates, was last at 149.4 per dollar, not far from the closely watched 150 level that analysts said would likely trigger further comments from Japanese officials in a bid to support the currency . [FRX/]

Japan’s currency has fallen about 6% against the dollar this year as investors pushed back their expectations of when the BOJ will end its ultra-loose monetary policy.

As for raw materials, futures stand at $82.56, up 0.68% on the day. [O/R]

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