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S&P 500 futures flat, oil up

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Dollar, bond yields tick lower ahead of CPI

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Pound holds, gilts soothed by UK inflation

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Sterling, gilts in focus ahead of UK CPI data

(Updates throughout with European morning trade)

By Amanda Cooper

LONDON, Jan 15 (Reuters) - Global stocks edged up on

Wednesday in cautious trading ahead of U.S. consumer price data

that could shift the monetary policy outlook there, while

investors waited to see if the earnings of big banks would match

sky-high expectations.

The bond market got some respite from the recent heavy

selling, as yields on Treasuries ticked lower and those on

German 10-year Bunds broke their second-longest

stretch of price losses in over 40 years.

Wall Street futures were flat in European trading, while the

regional STOXX 600 index rallied 0.3% on the day, led

mostly by gains in rate-sensitive UK homebuilders, after data

showed an unexpected cooling in British inflation.

Later in the day, investors will get a look at quarterly

results from JPMorgan ( JPM ) and Citigroup ( C/PN ), as well as at

consumer inflation numbers that could inform expectations of

what the Federal Reserve might do to interest rates this year.

ADM Investor Services Chief Global Economist Marc Ostwald

said the central bank's "Beige Book" for December, which

captures anecdotal evidence of conditions across the 12 Federal

Reserve districts, reported an uptick in economic activity, but

an expectation for price pressures to persist.

"Given the strength of the latest labour data, and expected

strength in this week's activity data, the data will likely

strengthen the Fed's resolve to pause its rate cutting cycle,"

he said.

Right now, the swaps market shows traders believe there is

only likely to be one rate cut this year, with a second

quarter-point reduction being a more distant possibility, as

just 31.4 basis points of easing are priced in.

This was closer to 45 bps about a week ago, before the

December employment report on Friday showed robust jobs growth.

PIVOT POINT

For the CPI report, forecasts are centred on a small 0.2%

rise in the core measure, with risks skewed to the upside. A

strong reading of 0.3% or more could see the selloff in global

stocks and bonds resume.

"This CPI print is a pivot data point. A dovish print likely

reignites the rally which is likely to get a boost from a strong

earnings period," said analysts at JPMorgan ( JPM ) in a note to

clients.

"A hawkish print could see the 10Y yield make a run at 5%,

increasing volatility across all asset classes, and continuing

to pressure equities."

Overnight, U.S. producer price data for December was

surprisingly tame, with the core measure flat in the month. That

restrained the U.S. dollar and pulled short-term Treasury yields

off their highs.

The benchmark 10-year U.S. yield was down 1.6 bps at 4.772%,

having hit a 14-month high just below 4.8% earlier this week.

Benchmark yields in Europe also ticked lower. German 10-year

yields were down 2 bps at 2.6%, having risen for 10 straight

days at Tuesday's close - the longest stretch of increases since

Feb. 22, which at 11 days was the longest since a 13-day stretch

of rises in May 1981, according to LSEG data.

Yields on UK government bonds, or gilts, fell

more sharply with the 10-year down 7.4 bps at 4.816%, after data

showed British inflation rose less than expected in December.

Gilts have been at the centre of this month's bonds selloff,

pushing long-dated yields to their highest since the late 1990s

over concerns about UK government finances.

On the currency markets, the pound was mostly

unchanged on the day at $1.2207, while the Japanese yen was one

of the strongest performers. The dollar fell 0.7% to 156.795 yen

as markets now see a 70% chance the Bank of Japan will raise

interest rates in January after Governor Kazuo Ueda said

policy-makers would discuss such an option next week.

In commodities, oil prices stabilised just below $80 a

barrel after a 1% drop on Tuesday.

(Additional reporting by Stella Qiu in Sydney and Caroline

Valetkevitch in New York; Editing by Jacqueline Wong, Kim

Coghill and Barbara Lewis)