European shares edge up as traders prepare for central bank meetings

European shares climbed at the open on Monday as investors prepared for a week of central bank meetings in the US and Europe and key economic data is likely to be influential in signaling the direction of interest rates.

Europe’s region-wide Stoxx 600 rose 0.3 percent, while France’s CAC 40 added 0.5 percent and London’s FTSE 100 added 0.2 percent.

The move followed a Wall Street rally last Friday, in which the blue-chip S&P 500 rose 0.1 percent and consolidated its move into bull market territory last week. The tech-heavy Nasdaq Composite added 0.2 percent.

Stocks were buoyed by conditions that the Fed would resist raising interest rates when they meet on June 13-14, the first pause in the central bank’s 14-month campaign to tame inflation.

“With signs that the economy is turning into a potential recession, the expectation is that (Fed policymakers) are likely to keep rates on hold,” said Susannah Streeter, head of money and markets at Hargreaves Lansdowne.

Traders awaited the latest US consumer price index report on Tuesday, which showed headline inflation expected to slow to 4.1 percent on a year-on-year basis in May, according to economists polled by Reuters.

A reading at 4.9 percent in April would mark a significant improvement, after the 5 percent figure in March, giving the Fed more room for pause.

“Any deviation from the forecast path is likely to cause a jolt of volatility in the markets,” Streeter said.

Contracts tracking the benchmark S&P 500 rose 0.3 percent and those tracking the Nasdaq 100 were up 0.4 percent ahead of the New York open.

Oil prices tumbled last week after Chinese data showed producer price deflation rose at its fastest pace since 2016 and exports performed worse than expected, indicating demand is outpacing the country. Was weak inside and out.

International benchmark Brent crude fell 1.6 per cent to $73.61, while US marker West Texas Intermediate fell 1.7 per cent to $69.02.

The yield on the two-year US Treasury note, which is sensitive to rate expectations, rose 0.01 percentage point to 4.62 per cent. The yield on the 10-year note was flat at 3.75 per cent. Bond yields rise as prices fall.

Meanwhile, economists are still confident that the European Central Bank will hike its deposit rate by another quarter percentage point when policymakers meet next Thursday.

Asian equities struggled for direction, with Hong Kong’s Hang Seng index down 0.2 per cent and Japan’s Topix down 0.7 per cent.