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World shares index just a few points from record highs

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European and US markets both at all-time peaks

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Bond market borrowing costs edge higher after US CPI

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Bitcoin bustles to new high, oil rangebound

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, March 13 (Reuters) - World shares held close to

record highs on Wednesday thanks to new all-time peaks in Europe

and on Wall Street, as investors bet hotter-than-expected U.S.

inflation won't stop the Federal Reserve and other central banks

from cutting interest rates.

Asian shares hit seven-month highs overnight as a number of

tech sectors made gains, but Europe went even better early on by

squeezing out its fifth record high in six sessions.

Volatility in currency markets remained low, however, much

to the disappointment of FX dealers and despite the European

Central Bank being set to publish its highly anticipated

operational framework review later in the day.

The dollar, euro, yen and pound

were all little changed on the day, and though the yen

looks ready to pounce if Japan finally raises interest rates

next week, the dollar hasn't moved by more than 1% in either

direction since November.

"We are in a very, very short-term, interest rate-driven

market where the overall story is a huge coalescence of

expectations for rate cuts (by the Fed, ECB and BoE) around

June," Societe Generale strategist Kit Juckes said.

"The big issue is euro-dollar, if they (Fed and ECB) are

both going to cut three times this year ... if all rates move in

parallel with each other FX has nothing to go on," he added.

Benchmark U.S. and European bond market yields that tend to

drive global borrowing costs were at one-week highs after

Tuesday's U.S. inflation upside surprise.

But the risk takers were still in charge there too, with the

gap between Italian and German 10-year yields shrinking to a

fresh 26-month low.

The latest rise in Europe's stock prices was driven by the

region's retailers as solid results from Zara-owner

Inditex and a 14% surge in Zalando shares

more than offset news of Adidas' first loss in 30

years due to its Kanye West problems.

Bitcoin bustled to its third straight record high at $73,400

as cryptomarkets continued to sizzle ahead of what is

known as a 'halving' where it effectively becomes tougher to

mine the currency.

SUBDUED

Overnight, MSCI's broadest index of Asia-Pacific shares

outside Japan ended lower after touching its

highest level since early August.

China's property stocks took another knock amid the ongoing

problems there, while Tokyo's Nikkei also finished in

the red as investors took profits on some of its near 20% surge

since early December.

U.S. stock index futures were also subdued as investors

awaited a slew of economic data this week, including producer

prices on Thursday and retail sales numbers, for more clues on

the Fed's rate-cut path.

The benchmark S&P 500 climbed to a fresh record high on

Tuesday as Oracle shares surged and slightly hot

consumer price data failed to dampen investors' hopes for

interest rate cuts in the coming months.

Traders now see a 66% chance of the first rate cut coming in

June, the CME FedWatch Tool showed. Since March 2022, the Fed

has raised its policy rate by 525 basis points to the current

5.25% to 5.50% range.

"While the February CPI data was noisy across segments, we

believe the U.S. economy continues to be in good shape and is

heading for a soft landing," said Mark Haefele, chief investment

officer at UBS Global Wealth Management, in a note.

Dow e-minis and S&P 500 e-minis barely

budged in Europe, while Nasdaq 100 e-minis were

fractionally lower.

The yen, which has been lifted from lows by

growing expectations of a rate rise in Japan, was about 0.2%

firmer at 147.33 per dollar after news of more wage hikes at

large Japanese companies.

"We think the rate lift-off could happen in the March

meeting, following the annual wage negotiation outcome to be

announced this Friday," said MUFG analyst Lloyd Chan.

In commodities, higher yields yanked gold from near

record levels and it was last at $2,157 an ounce. Crude futures

have been rangebound for several weeks. Brent was last

0.5% stronger at $82.36 a barrel.

(Additional reporting by Tom Westbrook in Sydney

Editing by Mark Potter)