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China works to defend markets

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Canadian dollar firms on reports that Trudeau will resign

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Europe stocks edge up in choppy trading

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Nikkei slips, Wall Street and European futures mixed

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Fed speakers, EU and China inflation data pack the diary

(Updates throughout with European morning trading)

By Wayne Cole and Amanda Cooper

SYDNEY/LONDON, Jan 6 (Reuters) - Global stocks edged up

on Monday ahead of a week crammed with U.S. economic data that

will be pivotal in setting expectations for interest rates,

although heightened political uncertainty kept any new-year

enthusiasm in check.

In China, the yuan hit a 16-month low and blue-chip stocks

traded at their weakest since late September, prompting the

country's stock exchanges and central bank to defend its falling

markets and soothe investor concern about the impact on the

world's second biggest economy of Donald Trump's imminent return

to the White House.

Meanwhile, reports on Monday suggested embattled Canadian

prime minister Justin Trudeau might announce his resignation

later in the day.

Markets seemed to have priced it in and might welcome an

election to clarify matters, leaving the U.S. dollar down 0.4%

at 1.4393 to its Canadian counterpart.

The MSCI All-World index rose 0.1%,

reflecting a slightly patchy performance in Europe, where the

STOXX 600 was up 0.1%, while Germany's DAX -

2024's top-performing major European index, was up 0.2%.

U.S. stock index futures were up 0.1-0.3%,

suggesting an extension to Friday's rally in the benchmark

indices.

"We start the new trading week, and new trading year, with

stocks having enjoyed a strong Friday rally, where both the S&P

500 and Nasdaq 100 erased all of the declines seen a day prior.

A choppy start, then, albeit in what were still thin trading

conditions, with S&P volumes around 20% below the 20-day

average," Pepperstone senior research strategist Michael Brown

said.

Adding to the sense of caution was anticipation of Friday's

U.S. December employment report, where analysts expect a rise of

150,000 in the number of workers on nonfarm payrolls and for

unemployment to hold at 4.2%

These will be preceded by data on ADP hiring, job openings

and weekly jobless claims, along with surveys on manufacturing,

services and consumer sentiment.

Anything upbeat would support the case for fewer rate cuts

from the Federal Reserve, and markets have already scaled back

expectations to just 40 basis points for 2025.

Investors will also have a chance to get some insight into

the thinking of Fed officials this week, with minutes from the

central bank's last meeting on Wednesday and a number of top

policy makers speaking including influential Fed Governor

Christopher Waller due to speak as well.

Inflation figures from Germany on Monday and for the euro

zone on Tuesday may help refine the outlook for more rate cuts

from the European Central Bank. Traders currently expect the ECB

to deliver four quarter-point cuts this year.

YIELDS CRAWL HIGHER

In fixed income, U.S. Treasury yields rose for a second day

to 4.624%, a whisker away from last week's eight-month high at

4.641%. Yields rose almost 80 basis points in the fourth

quarter, with over 30 bps in December alone.

Investor appetite will be tested this week by the sale of

$119 billion in new three-, 10- and 3-year Treasuries.

"(The) key level to watch in U.S. 10-year notes remains the

May 2024 high at 4.64%, a break above which may signal an

extension towards 4.75%," analysts at Saxo Bank said.

High yields have given the dollar a natural source of

support. The dollar index, which rose 0.9% last week, was down

0.3% on Monday, largely as a function of gains in the euro and

sterling.

The euro rose 0.25% on the day to $1.03365, just ahead of

resistance around $1.0340, while the pound clawed back some

ground after hitting eight-month lows last week to trade up 0.4%

at $1.2472.

The Chinese yuan finished Monday's domestic

session at 7.3296 per dollar, its weakest since September 2023.

Oil had found support from colder weather in Europe and the

United States, with a winter storm bringing snow, ice and

freezing temperatures to a broad swath of the U.S. on Sunday.

But early gains faded and Brent fell 0.4% to $76.22

a barrel, while European natural gas prices fell 1%

to 49.10 euros per megawatt hour (MWh), near 14-month highs.