SYDNEY- Asian shares firmed 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 US policy easing within just a few months.
Holidays in Britain and the United States made for thin trading ahead of Friday’s figures on core personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation.
Median forecasts are for a rise of 0.3 percent in April, keeping the annual pace at 2.8 percent , with risks on the downside.
“Consumer and producer price data suggest core PCE inflation lost further momentum in April after a strong start to the year,” analysts at TD Securities said in a note.
“Indeed, we look for the core index to advance 0.22 percent m/m vs 0.32 percent in March and an initial 0.25 percent estimate,” they added.
“We also look for the headline to rise 0.23 percent m/m while the super core likely cooled to 0.26 percent .”
Figures for inflation in the euro zone are also due on Friday and an expected tick up to 2.5 percent should not stop the European Central Bank 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 percent chance of an easing to 3.75 percent on June 6.
The ECB’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 Fed 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 influential head of the New York Fed John Williams.
The head of the Bank of Japan (BOJ) 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 BOJ holds its policy meeting on June 14 and there is some chance it may buck the global trend and hike rates again, albeit to a modest 0.15 percent.
