ECB hopes help global stocks end Q1 on a high
Mar 31 2014 , London
Markets focused on the flash estimate of euro zone inflation in March, due at 0900 GMT and likely to cement expectations the European Central Bank will take fresh steps at Thursday's policy meeting to counter the threat of deflation.
The median consensus of 36 economists polled by Reuters is for a decline in annual inflation to just 0.6 percent, which would be the lowest in over four years and well below the ECB's target of below but close to 2 percent.
"We expect euro zone inflation to fall to 0.6 percent, with downside risks, and expect no new measures from the ECB. However, a big surprise on the downside in today's flash CPI could prompt some pre-emptive action, though this remains a risk case," Barclays economists wrote in a note to clients on Monday.
Spain and Germany posted weaker-than-expected inflation data last Friday,
At 0745 GMT the FTSE EuroFirst 300 index of leading shares was up 0.5 percent at 1,339 points. Britain's FTSE 100 was up 0.6 percent at 6,655 points, Germany's DAX was up a third of one percent at 9,619 points and France's CAC 40 was up a similar amount at 4,425 points.
U.S. stock futures pointed to gains of between a third and half of one percent across the three major indices.
In Asia, the MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.9 percent to close at a three-week high of 137.84 points, on heightened speculation Beijing will launch new spending measures and on reduced tensions in Ukraine.
Tokyo's Nikkei stock average also rose 0.9 percent to a three-week high of 14,827 points, supported by comments from China's Premier Li Keqiang on Friday that Beijing was ready to support the cooling economy.
SPANISH BOND BONANZA
In a lacklustre quarter for equity investors, Wall Street and the main European indices have only managed to eke out slender gains of around 1 percent as the U.S. Federal Reserve started trimming the bond-buying stimulus that has fuelled global investors' appetite for risk.
New Fed chair Janet Yellen said on March 19 that interest rates could start to rise six months after the bond buying is finished completely. That could be early next year.
Yellen will speak in Chicago later on Monday and the focus is on whether she maintains her stance on rates, which the market has interpreted as hawkish.
The 10-year yield on U.S. Treasuries rose on Monday to 2.75 percent. This lent broad support to the dollar, which was flat on the day against a basket of six major currencies at 80.2.
The euro was unchanged at $1.3752, near Friday's one-month low.
In peripheral euro zone bond markets, Spanish 10-year yields slipped to 3.23 percent, hovering close to Friday's eight-year low of 3.2 percent.
Even after six consecutive quarters of decline, the fall in Spanish 10-year yields accelerated in the first quarter. The plunge of around 90 basis points in the first three months of the year is the biggest quarterly fall since the end of 1996.
"The EGB (European government bonds) market is fairly overbought but should be boosted further by a weak ... (inflation) figure," said Luca Jellinek, European head of fixed income at Credit Agricole.
In emerging markets, Turkey's lira hit a two-month high after Prime Minister Tayyip Erdogan declared victory in local polls that had become a referendum on his rule, stirring hopes months of political turbulence would ease. The lira brushed 2.165, its strongest against the dollar since late January.
In commodities markets, gold fell slightly to $1,292.50 an ounce, near a six-week low of $1,285.34 hit on Friday, and U.S. crude oil futures edged down 30 cents to $101.37 a barrel after settling on Friday at its highest since March 7.