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Asian stock markets : https://tmsnrt.rs/2zpUAr4

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Nikkei off 2.3%, S&P 500 futures slightly lower

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Sources say BOJ may end negative rates this month

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Eyes on US core CPI for slowdown in annual inflation

(Updates prices)

By Wayne Cole

SYDNEY, March 11 (Reuters) - Asian share markets

sputtered on Monday while the dollar looked vulnerable ahead of

a reading on U.S. inflation that could hasten, or delay, the

start of global rate cuts.

The yen edged higher as Reuters reported a growing number of

Bank of Japan policymakers are warming to the idea of ending

negative rates this month on expectations of hefty pay hikes in

this year's annual wage negotiations.

Data released on Monday showed Japan was not, in fact, in

recession after economic growth was revised up to an annualised

0.4% for the December quarter.

Tuesday's U.S. consumer price index (CPI) report for

February is forecast to rise 0.4% for the month and keep the

annual pace steady at 3.1%. Core inflation is seen rising 0.3%,

which will nudge the annual pace down to the lowest since early

2021 at 3.7%.

The slower core would complement the softer conditions seen

in the February payrolls report, where unemployment hit a

two-year high of 3.9%, and would keep the Federal Reserve on

track to cut rates in the next few months.

"We continue to expect four 25bp cuts in the Fed funds rate

this year, starting in June," analysts at Goldman Sachs wrote in

a note. "However, the soft employment report increases the odds

that the FOMC begins the easing cycle in May instead."

"We expect that developed market central banks will lower

policy rates by 128bp on average over the next 12 months," they

added. "We also expect that emerging market central banks will

cut rates by 190bp on average."

Futures imply about a 30% chance of a Fed cut in May

and 70% for a first move in June.

Chinese price data out over the weekend showed a welcome

bounce in inflation to 0.7% in February, though producer prices

remained mired in deflation.

Beijing also promised to improve home sales in a "forceful"

and "orderly" way to support the country's beleaguered

residential property market, but was short on details.

Hopes for lower borrowing costs have been a fillip for

equities with MSCI's broadest index of Asia-Pacific shares

outside Japan easing 0.1%, after hitting an

eight-month peak on Friday.

Japan's Nikkei retreated 2.3%, having scored a

succession of all-time highs last week. Chinese blue chips

added 0.2%, but without much conviction.

BOJ TURNING POSITIVE

S&P 500 futures and Nasdaq futures were a

fraction lower, having both run into profit taking on Friday as

artificial intelligence diva Nvidia ( NVDA ) shed 5.6%.

EUROSTOXX 50 futures fell 0.4%, and FTSE futures

dipped 0.2%.

Treasury bonds continued their rally after the benign jobs

report with 10-year yields touching a one-month low

of 4.038% and last trading at 4.060%.

The drop in yields has undermined the dollar, especially

against the yen given market speculation that the BOJ will end

its negative rate policy (NIRP) and yield curve control (YCC)

this month.

"We expect JPY strength tactically on short-covering in the

build-up to the March 18/19th BoJ meeting, one we think is live

for a change in YCC and NIRP, and recent higher inflation

readings only add to our conviction to be tactically long JPY,"

said Paul Robson, head of G10 FX strategy at NatWest Markets.

"We've turned tactically bearish the USD and initiated short

positions vs both EUR and JPY," he added. "Our short-term fair

value model suggests EUR/USD is too low based on bond spreads

and relative curve steepness."

The dollar was off at 146.82 yen, having shed 2%

last week to a five-week low of 146.48.

The euro was holding firm at $1.0939, after

bouncing 0.9% last week to as high as $1.0980.

The decline in the dollar and bond yields has been

supportive of non-yielding gold which was up at $2,180 an ounce

, having surged 4.5% last week to record peaks.

Oil prices have had a tougher time as worries about China's

demand offset supply cuts by producer group OPEC+.

Brent dipped 54 cents to $81.54 a barrel, while U.S.

crude lost 57 cents to $77.44 per barrel.