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

Dolan

Wall Street and world stock markets have cleared the

first-quarter corporate earnings season comfortably enough to be

back stalking record highs, but macro markets don't want to

budge much further until they see this week's U.S. inflation

update.

Wednesday's U.S. consumer price report sucks much of the

oxygen out of the early part of the markets week - critical as

it is in revealing whether disinflation has resumed after a

sticky Q1, and at least enough to keep Federal Reserve easing

expectations this year in the frame.

For what it's worth, consensus forecasts for the April print

see monthly core CPI gains slowing to a 0.3% pace from 0.4% in

March - dragging the annual rate down to 3.6% from 3.8%. The

headline rate is expected to slip back to 3.4% from 3.5%.

The New York Fed's survey of inflation expectations for last

month gets released later on Monday to give color to the picture

in advance - and provide a reality check to the uptick in the

equivalent University of Michigan poll that ruffled feathers on

Wall Street on Friday.

Despite the bumpier U.S. CPI readings through the first

quarter, one-year ahead inflation expectations in the NY Fed

survey stayed constant at 3% through the first three months of

the year. The University of Michigan's 1-year outlook, however,

jumped to 3.5% this month from 3.2% in April - even as consumer

sentiment fell sharply.

Also unusual compared to recent months is that the CPI data

is released after the April producer price report, which is due

out Tuesday. The core annual PPI rate is expected to be steady

at 2.4%.

And whatever heat is left in U.S. inflation, it's certainly

not there in China. Although CPI rose above forecast there last

month, it is still running at only 0.3% year-on-year while

producer price deflation continues at an annual 2.5%.

With new bank lending in China falling more than expected in

April, and broad credit growth hitting a record low, pressure

for more stimulus to support the economy remains intense.

China's finance ministry said it will this week start the

long-awaited sales of 1 trillion yuan ($138.23 billion) of

long-term treasury bonds, proceeds from which Beijing hopes to

use to help spur key sectors.

Beginning on Friday, Reuters sources said there will be 300

billion yuan worth of 20-year bonds, 600 billion yuan worth of

30-year bonds and 100 billion yuan worth of 50-year bonds sold.

For Chinese stocks, however, geopolitics is never far from

the headlines. Even though Hong Kong stocks rose again on

Monday, mainland shares were more subdued as new energy vehicle

shares lost 2.2% following Friday's news that U.S.

President Joe Biden's planned new China tariffs would including

a major hike in levies on electric vehicles.

World stocks were flat more generally, with Tokyo

off a touch as a slightly weaker yen mostly held the

line.

In a sign that recent government intervention to support the

yen may be shifting market psychology, the latest Commodity

Futures Trading Commission data showed that hedge funds and

speculators slashed their short yen positions by 20% in the week

to May 7 - the biggest weekly yen-bullish swing since 2020.

Back on Wall Street, the CPI vigil left the S&P500

little changed on Friday and futures are likewise ahead of

today's bell.

But with the Q1 earnings season petering out, it is not hard

to see why stocks are back near record highs. S&P500 firms are

now tracking annual profit growth of some 7.4% for the quarter -

higher than expectations at the start of the year. Excluding the

energy sector, that pace is now in double digits and estimates

for the equivalent quarter next year are as high as 15%.

On Monday, Treasury yields were generally steady

and the dollar mostly flat.

In Europe, macro markets will keep half an eye on the euro

group finance ministers meeting in Brussels - where national

budgets, competitiveness and banking and capital markets union

are being discussed.

Danish shipping giant AP Moeller-Maersk stood

out as its shares jumped 7.1%, boosted by a rise in freight

rates amid higher trade volumes and the Red Sea crisis.

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

on Monday:

* New York Federal Reserve's April inflation expectations survey

* Federal Reserve Board Vice Chair Philip Jefferson and

Cleveland Fed President Loretta Mester speak

* Eurogroup finance ministers meet in Brussels, European Central

Bank board member Piero Cipollone attends

* US Treasury auctions 3-, 6-month bills

(By Mike Dolan, editing by Ed Osmond

mike.dolan@thomsonreuters.com)