San Francisco Frontiers - Stock markets rise as US inflation data, ECB rate loom

Wall Street opened higher, with traders already focused on Wednesday's consumer price index report, which could determine the Federal Reserve's next move on interest rates.

Investors have worried that the Fed's rate-hike campaign to combat high inflation could tip the world's biggest economy into a severe recession.

But US Treasury Secretary Janet Yellen said Sunday she was optimistic that the economy was on course for a soft landing.

"I am feeling very good about that prediction," she said. "I think you'd have to say we're on a path that looks exactly like that."

She added: "Every measure of inflation is on the road down."

The Paris and Frankfurt stock exchanges were also up in afternoon deals even though the European Commission cut its 2023 growth outlook for the eurozone, from 1.1 percent to 0.8 percent.

The data will give the European Central Bank more food for thought when it meets Thursday to decide whether to continue or pause its own rate hikes after 10 straight increases.

The commission said the higher borrowing costs had an impact on the eurozone economy.

"The new forecasts won't come as a major surprise and may even prove overly optimistic over time but they do come days ahead of the next ECB meeting and could tempt some policymakers into voting to pause the tightening cycle," said Craig Erlam, senior market analyst at OANDA trading platform.

"Weaker economic readings will probably drive a lively debate and they obviously won't suggest, if they do hike, that it's job done," he added.

Elsewhere, London also rose while Tokyo and Hong Kong finished lower.

After a slow start, Asian traders turned more positive through the day and tracked last week's gains on Wall Street, with data showing a pick-up in Chinese inflation lifting sentiment.

Traders took heart from news that China's consumer price index rebounded in August, having contracted the month before.

While the 0.1 percent rise was less than expected, it gave traders some hope that the economy is slowly on the mend after a painful 2023 so far.

On currency markets, the yen picked up after sinking last week to a 10-month low against the dollar, with support coming from comments seen as hawkish by Bank of Japan boss Kazuo Ueda.

He told the Yomiuri newspaper that policymakers would have a better idea later in the year about wage rises, a key data point for rate decisions.

The yen has tumbled around 10 percent owing to the BoJ's refusal to move away from its ultra-loose monetary policy while the Fed pushed borrowing costs to a two-decade high.

The yuan also bounced back from a 16-year low against the dollar after the People's Bank of China said it would crack down on speculation that distorts the value of the currency after months of volatility.

In energy markets, gas prices rallied as strikes continued at Chevron plants in Australia.

Oil prices also ticked up.

Recent strong gains in crude prices have fuelled concerns that inflation could stay elevated for longer than expected, putting pressure on central banks to keep interest rates high.

- Key figures around 1345 GMT -

New York - Dow: UP 0.5 percent at 34,737.55 points

London - FTSE 100: UP 0.1 percent at 7,485.36

Frankfurt - DAX: UP 0.4 percent at 15,801.56

Paris - CAC 40: UP 0.6 percent at 7,281.55

EURO STOXX 50: UP 0.5 percent at 4,256.78

Tokyo - Nikkei 225: DOWN 0.4 percent at 32,467.76 (close)

Hong Kong - Hang Seng Index: DOWN 0.6 percent at 18,096.45 (close)

Shanghai - Composite: UP 0.8 percent at 3,142.78 (close)

Dollar/yen: DOWN at 146.44 yen from 147.81 yen on Friday

Euro/dollar: UP at $1.0728 from $1.0702

Pound/dollar: UP at $1.2533 from $1.2469

Euro/pound: DOWN at 85.63 from 85.83 pence

West Texas Intermediate: UP 0.4 percent at $87.89 per barrel

Brent North Sea crude: UP 0.6 percent at $91.22 per barrel

burs-lth/cw

E.Walker--SFF