By Alun John and Ankur Banerjee
LONDON/SINGAPORE (Reuters) - European shares failed on Thursday to follow overnight gains in the U.S. and China, while the dollar sat near a two-month high before U.S. inflation data.
Europe's broad Stoxx 600 index was down a whisker on the day, and the German 10 year bund yield, the euro zone benchmark nudged up to 2.27%, a five-week high, but the market focus was on gains in China spurred by hopes that a briefing this weekend will deliver anticipated fiscal stimulus.
U.S. CPI is due at 1230 GMT. "At stake is whether we get one or two more Fed cuts this year, or even none at all," said Kenneth Broux, head of corporate research FX and rates at Societe Generale (EPA:SOGN).
He said the re-acceleration of U.S. growth in the third quarter - the Atlanta Fed's GDP 'nowcast' estimate is 3.2% - and the tightening of the labour market in September "suggest disinflation may be stalling".
A "punchy" core reading "could cause a second wobble in the bond market," said Broux.
Economists polled by Reuters see core inflation holding steady at a 3.2% year-on-year clip, and 0.2% month on month.
The U.S. 10 year yield was up 2 bps at 4.084%, its highest since late July. It has jumped 24 bps in the past week, largely on the back of a Friday's much hotter than expected payrolls data. [US/]
That, in turn has helped the dollar to its strongest in weeks against the euro, yen and pound. [FRX/]
U.S. share futures were down around 0.1% on Thursday after the S&P 500 and the Dow had both closed at record highs on Wednesday. [.N]
One thing that was on the agenda in Europe was France, where the new government is to deliver its 2025 budget late on Thursday with plans for 60 billion euros ($65.68 billion) worth of tax hikes and spending cuts to tackle a spiralling fiscal deficit.
The now closely watched spread between French and German government bonds, a gauge of how much premium investors demand for holding French debt, was steady at 76 bps. [GVD/EUR]
That's below its recent highs above 80, but still well above the around 50 bps it had been before President Macron called parliamentary elections in June.
CHINA
The start of the day was all about China, and mainland shares got a lift early in the Asia session as China's central bank kicked off its 500 billion yuan facility to spur capital markets, a plan it announced late September as part of a series of stimulus measures.
China's blue-chip CSI300 index failed to hold all those gains, and the index closed up just over 1%, after the previous day's 7% fall, which was triggered by some investor concern about the lack of details in the stimulus package. [.SS]
Hong Kong's Hang Seng surged over 3%, after slipping 1.3% on Wednesday and is up 26% this year.
The market's attention is now firmly on a finance ministry press conference on Saturday that will provide details of the fiscal stimulus plan. The theme of the news conference is "intensifying countercyclical adjustment of fiscal policy to promote high-quality economic development."
"We believe the consensus is expecting around 2 trillion to 3 trillion yuan in size of fiscal stimulus measures," said Richard Tang, China strategist at Julius Baer.
Tang expects more announcements of additional fiscal measures in the coming weeks.
It's been a volatile week for Chinese markets.
Mainland shares rallied to two-year highs on Tuesday after the long National Day holiday but quickly lost steam as the lack of details on stimulus measures dealt a blow to market enthusiasm.
Benchmark indexes in China then notched their biggest daily losses on Wednesday since the COVID-19 pandemic began.
In commodities, oil prices rose as investors contended with rising tensions in the Middle East and its impact on oil supply, as well as a spike in demand as a major storm barrelled into Florida.
Brent crude futures was 1% higher at $77.34 a barrel, while the U.S. West Texas Intermediate (WTI) futures rose a similar amount to $73.98 a barrel. [O/R]
Gold was 0.3% higher at $2,615 an ounce. [GOL/]