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Europe stocks nudge at record highs

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US CPI data to test wagers for Sept rate cut

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Powell leads host of Fed speakers this week

(Updates with comments; refreshes prices at 0748 GMT)

By Wayne Cole and Amanda Cooper

SYDNEY/LONDON, May 13 (Reuters) -

Global stocks neared record highs on Monday, in a week where

inflation figures could make or break expectations for earlier

U.S. rate cuts, while Chinese activity data will test optimism

about a sustained recovery in the world's No. 2 economy.

While U.S. inflation data will take centre-stage, reports on

Chinese retail sales and industrial output could also have a big

impact on overall investor sentiment.

Chinese authorities are also set to sell 1 trillion yuan

($140 billion) in longer-dated bonds to help fund stimulus

spending at home.

The improved sentiment has helped lift Chinese blue chips to

a seven-month high and the positive vibes carried over into

Europe, where the STOXX 600 held near record highs and

U.S. stock futures rose 0.1%.

"U.S. equity traders, along with bond, gold, and dollar

traders (well, everyone really), will be looking to start the

week by massaging exposures ahead of U.S. PPI, and CPI and

retail sales," Pepperstone strategist Chris Weston said.

The MSCI All-World index nudged higher on

Monday and is now less than 0.5% away from March's record highs.

Globally, much now depends on whether the U.S. April

inflation report will show a moderation after three months of

upside surprises. Median forecasts are for core consumer prices

to rise 0.3% in the month, compared with 0.4% in March, pulling

the annual rate down to 3.6%.

So crucial is the data that rounding to the second decimal

place could make all the difference.

"Our unrounded core CPI forecast at 0.27% m/m suggests

larger risks for a dovish surprise to a rounded 0.2% increase,"

noted analysts at TD Securities.

A low number would likely boost bets that the Federal

Reserve could ease as soon as July, which is currently priced at

only a 25% chance. Equally, a high inflation print could push a

rate cut out past September and challenge pricing for 42 basis

points of easing this year.

Also due are figures on U.S. producer prices, retail sales

and jobless claims, along with final reports on European

inflation that should reinforce expectations for a June rate cut

from the European Central Bank.

There are a host of Fed speakers this week to update markets

on their thinking, including Fed Chair Jerome Powell, who

appears with the head of the Dutch central bank on Tuesday.

UPBEAT US EARNINGS

With 80% of the S&P 500 having reported results, companies

are on track to have increased earnings by 7.8%, well ahead of

the April expectation of 5.1%.

Once Nvidia ( NVDA ) reports on May 22, quarterly earnings

from so-called Magnificent Seven firms are on track to jump 49%,

according to LSEG data.

Companies reporting this week include Walmart ( WMT ), Home

Depot ( HD ) and Cisco ( CSCO ).

Global share indices have also bounced to record highs in

recent weeks, even as markets scale back some of their more

aggressive wagers for rate cuts this year.

"A straightforward interpretation of financial market

performance is that there is more underlying strength in the

global economy than had been anticipated and higher interest

rates are reflecting rather than impeding global growth," says

Bruce Kasman, head of economic research at JPMorgan.

"We lean in this direction as our 2024 growth and policy

rate forecasts both move higher."

The relative outperformance of the U.S. economy continues to

underpin the dollar, while only the threat of Japanese

intervention is stopping it from re-testing the 160 yen barrier.

The Bank of Japan on Monday sent a hawkish signal to markets

by cutting the amount of Japanese government bonds it offered to

buy in a regular operation, pushing yields up.

The dollar was holding at 155.87 yen on Monday,

while the euro was flat at $1.0777 having faced

resistance around $1.0791 last week.

Gold eased 0.5% to $2,347 an ounce, having gained 2.5% last

week on demand from momentum funds and talk of ongoing buying by

China.

Oil prices held mostly steady, with Brent crude futures

up 0.1% at $82.87 a barrel, while U.S. crude was

up 0.13% at $78.36.

($1 = 7.2339 Chinese yuan)