World stocks rise ahead of US data key to Fed rate debate
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Crypto markets cheer first US bitcoin ETF approvals
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Dollar subdued, oil rebounds after latest stumble
By Marc Jones and Ankur Banerjee
LONDON, Jan 11 (Reuters) - World stock markets rose on Thursday ahead of key U.S. inflation data and amid widespread excitement in the crypto world after the United States approved the first exchange-traded funds (ETFs) to track bitcoin.
MSCI's top world index was up 0.3% as London , Paris, and Frankfurt all swept higher, and after Tokyo's Nikkei breached the 35,000 point barrier for the first time since 1990 overnight in Asia.
The exuberant mood looked likely to continue on Wall Street, where E-mini futures for the S&P 500 were up 0.3% and all the main volatility and fear gauges were pointing down.
Market attention has zeroed in on the upcoming U.S. consumer price index report (CPI) for December. Core CPI is forecast to remain unchanged at 0.3% from the month before, while year-on-year inflation is expected to slow to 3.8% from November's 4%, a Reuters poll showed.
"The risk is that markets sell off on a strong print," said Ben Bennett, APAC investment strategist for Legal and General Investment Management (LGIM). "The reaction could be more muted if we get a soft number."
U.S. Treasury yields, which are driving global borrowing costs at the moment, were hovering just under 4% in Europe.
Germany's equivalent 10-year yield briefly hit its highest in almost a month early on in Europe after some hawkish comments from European Central Bank member Isabel Schnabel on Wednesday, but then reversed to settle at 2.19%.
Since the start of the year, investors have been rethinking just how sharply and early the Fed and others will cut interest rates. Fed futures prices indicate traders anticipate 140 basis points (bps) of easing this year, compared with 160 bps of cuts expected at the end of 2023.
Still, it is higher compared to the Fed's projection of 75 bps of cuts in the year. Markets are pricing in a 69% chance of a rate cut as soon as in March, the CME FedWatch tool showed.
Federal Reserve Bank of New York President John Williams said on Wednesday it was too soon to call for rate cuts as the central bank still had some distance to go on getting inflation back to its 2% target.
LGIM's Bennett said investors were underestimating the risk of a U.S. recession. "Soft CPI prints could eventually become a sign of disappointing demand. But that's probably still a while away."
BITCOIN BOOST
Crypto markets were the day's other main focus after U.S. regulators late on Wednesday approved the first U.S.-listed ETFs to track bitcoin.
Though long-expected, the green light marks a watershed moment for the world's best known cryptocurrency, with most of the new funds expected to begin trading on Thursday.
Standard Chartered's head of digital assets research Geoff Kendrick has estimated the approval, along with bitcoin's 'halving' in April, which cuts the currency's supply and historically kick-starts price rises, could send it to $100,000 by the end of the year.
"If ETF-related inflows materialise as we expect, we think an end-2025 level closer to $200,000 is possible," he said, assuming that between $50 billion and $100 billion would flood into the new U.S. ETFs by the end of the year.
On Thursday, bitcoin was little changed and a shade above $46,000, having surged more than 70% since October in anticipation of the decision from the regulator.
In the more traditional parts of the currency market, the Japanese yen recouped some of its losses and was last at 145.43 per dollar, having dropped 0.9% overnight. Data this week showed Japanese workers' real wages shrank for a 20th straight month in November - confounding officials' wishes to see wage gains before lifting interest rates.
The dollar was steady ahead of the U.S. inflation report, which in turn helped gold rise 0.5% to $2,033.92 an ounce and oil put on more than 1.5% to leave Brent at $78 a barrel.
It had dropping nearly a dollar in the previous session after a surprise jump in U.S. crude stockpiles raised worries about demand in the largest oil market.
Investor focus will also be on the U.S. earnings season, with banking giants JPMorgan Chase, Bank of America , Citigroup and Wells Fargo all due to report earnings on Friday. (Reporting by Marc Jones in London and Ankur Banerjee in Singapore Editing by Mark Potter)
Standard Chartered (STAN)