The Albany Gazette - Stocks struggle at key week for rate calls

The US Federal Reserve updates its policy on borrowing costs on Wednesday, followed by interest rate decisions from the European Central Bank and Bank of England on Thursday.

With all three expected to hold borrowing costs after hiking multiple times to combat high inflation, traders will be looking for clues in the banks' statements on when rate cutting is likely to start as the pace of price rises cool.

In equities trading on Monday, Tokyo closed higher as the yen tumbled against the dollar, boosting exporters.

Paris pushed higher, not far from its record high in April, while the Dax set a new intraday record above 16,800 and a new closing record. London weakened, meanwhile.

Wall Street was trading mixed in late morning trading with the Dow higher the S&P flat, and the Nasdaq slipping.

"With some key market-moving events on the near horizon, market participants will be forgiven for taking a non-committal line at this juncture," said Briefing.com analyst Patrick O'Hare.

"Still, no-one is jumping the line to force a downside break, so the price action itself continues to keep sellers at bay," he added.

The yen shed one percent versus the dollar on waning expectations that the Bank of Japan would tighten its ultra-loose monetary policy next week, before paring losses.

While many central banks have significantly hiked interest rates over the past couple of years in a bid to tame soaring prices, the BoJ has refused to shift from its long-term programme of sub-zero rates to kickstart the world's number three economy.

All eyes this week will be on clues regarding the outlook for borrowing costs in the United States and Europe.

"Central bank meetings of the Federal Reserve, European Central Bank and the Bank of England are likely to be crucial in managing expectations when it comes to the timing and pace of when markets can expect to see rate cuts begin," noted Michael Hewson, chief market analyst at CMC Markets UK.

A forecast-beating US jobs report on Friday -- and a pick-up in consumer sentiment -- tempered expectations for Fed interest rate cuts in the new year but were not enough to jolt confidence that decision makers have finished with their tightening cycle.

OANDA analyst Craig Erlam said this makes Tuesday's consumer price data all the more important, with headline inflation expected to fall to 3.1 percent and core inflation to hold steady at 4 percent.

"A setback here following the stronger jobs report on Friday could encourage the FOMC to dig their heels in a little, warning of upside risks and even, the door still being open to further hikes," he said, referring to the Fed committee that sets monetary policy.

With markets already pricing in four interest rate cuts starting from May, such statements by Fed officials could cause turbulence.

Asian traders struggled to extend a broad rally on Monday, with sentiment jarred by figures showing China slipped further into deflation last month as leaders struggled to kickstart the stuttering economy.

Consumer prices fell at their steepest pace in three years, data showed, fuelling fresh calls for the government to unveil more economic support measures.

"China's deflation situation is deepening with the triple whammy from domestic food prices, international oil price corrections and weak domestic demand," said economists at Citigroup.

"There is no time for policy hesitation to prevent a vicious loop between deflation, confidence and activities."

- Key figures around 1630 GMT -

New York - Dow: UP 0.3 percent at 36,354.90 points

London - FTSE 100: DOWN 0.1 percent at 7,544.89 (close)

Paris - CAC 40: UP 0.3 percent at 7,551.53 (close)

Frankfurt - DAX: UP 0.2 percent at 16,794.43 (close)

EURO STOXX 50: UP 0.4 percent at 4,540.19 (close)

Tokyo - Nikkei 225: UP 1.5 percent at 32,791.80 (close)

Hong Kong - Hang Seng Index: DOWN 0.8 percent at 16,201.49 (close)

Shanghai - Composite: UP 0.7 percent at 2,991.44 (close)

Dollar/yen: UP at 146.40 yen from 144.97 yen on Friday

Euro/dollar: DOWN at $1.0745 from $1.0767

Pound/dollar: DOWN at $1.2546 from $1.2550

Euro/pound: DOWN at 85.66 pence from 85.76 pence

West Texas Intermediate: DOWN 0.6 percent at $70.79 per barrel

Brent North Sea crude: DOWN 0.5 percent at $75.49 per barrel

burs-rl/db

(F.Allen--TAG)