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Asian shares gain ahead of US, EU inflation data


Holidays in Britain and the US made for thin trading ahead of figures on core PCE, the Fed’s preferred measure of inflation

Asian shares gained on Monday as investors braced for a busy run of inflation data that could set the scene for a European rate cut as soon as next week and a U.S. policy easing within a few months.

Holidays in Britain and the US made for thin trading ahead of Friday’s figures on core PCE, the Fed’s preferred measure of inflation.

Median forecasts are for an increase of 0.3% in April, keeping the annual pace at 2.8%, with risks on the downside.

Consumer and producer price data indicate core PCE inflation lost further momentum in April following a strong start to the year, analysts at TD Securities said in a note.

Indeed, we look for the core index to gain 0.22% m/m vs. 0.32% in March and an initial 0.25% estimate, they added.

We also look for the headline to increase 0.23% m/m while the super core likely cooled to 0.26%, they said.

Data for inflation in the euro zone are also due on Friday and an expected rise to 2.5% should not stop the ECB from easing policy next week.

Policy makers Piero Cipollone and Fabio Panetta both flagged a coming cut over the weekend, while markets imply an 88% probability of an easing to 3.75% on June 6.

The European Central Bank’s chief economist told the Financial Times newspaper that the central bank was ready to start cutting, but policy would still need to be restrictive this year.

The Bank of Canada might also ease next week, while the U.S. Federal Reserve is seen waiting until September for its first move.

At least eight Fed officials are due to speak this week, including two appearances by the New York Fed John Williams.

The head of the Bank of Japan said on Monday it would proceed cautiously with inflation-targeting frameworks, adding that some challenges were “uniquely difficult” for Japan after years of ultra-easy monetary policy.

The Bank of Japan holds its policy meeting on June 14 and there is some chance it may buck the global trend and raise rates again, although to a modest 0.15%.

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