A look at the day ahead in U.S. and global markets from Mike

Dolan

As Wall Street nervously awaits the March consumer price

inflation report, the commodity complex - buoyed by an improving

global growth outlook - adds another complication to the

interest rate picture.

Markets are already anxious their long-favored month for the

start of the U.S. rate cut cycle may turn up a blank and rate

futures now see June as a coin toss for the Federal Reserve

following another impressive jobs report last week.

Even though the European Central Bank, Bank of England and

Bank of Canada are all still favoured to cut that month, implied

probabilities of a move in all three have also wobbled a bit

this week.

And as China's factories show signs of a significant rebound

alongside a still-brisk U.S. expansion, rising energy and metals

prices may add another reason for central banks to remain

cautious about easing credit too early.

Shanghai copper prices traded at record highs on Tuesday on

optimism around positive manufacturing signals from the major

economies, with global copper futures now up about 10%

for the year to date. Record high gold prices are up about 12%

in 2024 and the CRB core commodity index is up 15%.

Even though U.S. crude oil prices have backed off a

little from last week's 2024 high, they are still up more than

20% since the start of the year.

The positive twist for commodity stocks in the resource

based sector is offset by the additional headache this gives

central bankers already wary about inflation stuck stubbornly

above 2% targets.

Minneapolis Fed President Neel Kashkari, who last week said

there may be no rate cuts this year if inflation continues to

move sideways, reiterated his stance overnight and said the Fed

cannot stop short on its inflation fight.

JPMorgan ( JPM ) boss Jamie Dimon struck a similar note in his

annual letter to shareholders this week, saying the resilient

economy, high public spending and disruptive geopolitics "may

lead to stickier inflation and higher rates than markets

expect".

There was little clarity from the latest New York Fed survey

on Monday. The poll showed the public sees inflation a year from

now at 3%, unchanged from the prior month, but they raised their

three-year view to 2.9% while cutting the five year outlook to

as low as 2.6%.

However, the survey also showed creeping nervousness about

job security and debt repayments.

And this was something dovish Chicago Fed chief Austan

Goolsbee chimed with on Monday too, saying the U.S. central bank

must weigh how much longer it can maintain its current interest

rate stance without it damaging the economy.

"You've got to pay attention to how long do you want to be

that restrictive," Goolsbee said. "If you're there too long, the

unemployment rate is going to start going up."

The upshot for stocks was a flat Monday and futures

have shifted little overnight.

U.S. Treasury yields got some respite ahead of a series of

big auctions this week, starting with $58 billion of 3-year

notes later on Tuesday. U.S. 10-year yields slipped

back from 2024 highs, ebbing below 4.40%, and the dollar

came off the boil too.

Despite worries about U.S. public debt load, Morningstar

DBRS confirmed its AAA credit rating of the U.S. Treasury on

Monday.

The other focus of the week is the start of the corporate

earnings season on Friday.

Annual S&P500 profit growth through the first quarter is

penciled in at 5%, with revenue growth of some 3% - cooler than

7% and 4% forecasts respectively seen at the start of the year.

However, earnings growth is still expected to accelerate

back to as high as 14% by the final quarter of the year.

And while the expected annual earnings expansion for the

full calendar 2024 has slipped about two points to just under

10%, the 2025 outlook has been revised up by a similar amount to

near 14%.

Key diary items that may provide direction to U.S. markets later

on Tuesday:

* US March NFIB small business survey,

* Swiss National Bank vice chair Martin Schlegel speaks

* US Treasury sells $58 billion of 3-year notes

(By Mike Dolan, editing by Ed Osmond,

[email protected])