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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

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By Marc Jones

LONDON, March 13 (Reuters) - World shares were eyeing

more record highs on Wednesday after new peaks in Europe and on

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

inflation will not stop the Federal Reserve and other central

banks from cutting interest rates.

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

of tech sectors there made gains, but Europe was doing even

better by squeezing out its fifth all-time high in six sessions.

Volatility in foreign exchange markets remained low,

however, much to the disappointment of currency dealers, ahead

of the release by the European Central Bank of its highly

anticipated operational framework review.

The dollar, euro, yen and pound

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

looks ready to jump if Japan finally raises interest rates next

week, the dollar has not 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 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 broadly in charge there too,

with the gap between Italian and German 10-year yields shrinking

to a fresh 26-month low and France's central bank chief backing

a "spring" ECB rate cut.

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.

Banking shares in the region hit a more than 6-year high

too, while Bitcoin bustled to its third straight record high at

$73,679 as crypto markets limbered up for 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 looking steady after the

recent run of highs there and investors await a further slew of

economic data this week, including producer prices on Thursday

and retail sales numbers, for more clues on the Fed's path.

The benchmark S&P 500 hit a fresh record high on

Tuesday as Nvidia ( NVDA ) and Oracle shares surged and

the slightly hot consumer price data failed to dampen investors'

rate cut expectations.

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," Mark Haefele, chief investment

officer at UBS Global Wealth Management, said in a note.

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

budged as the start of U.S. trading loomed, 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 $2,164 an ounce. Crude futures

have been range-bound for several weeks. Brent was last

1.5% stronger at just over $83 a barrel.

(Additional reporting by Tom Westbrook in Sydney

Editing by Tomasz Janowski)