By Harry Robertson and Ankur Banerjee
LONDON/SINGAPORE (Reuters) -Global shares rose on Monday as oil prices retreated from a six-month peak, while U.S. bond yields hit their highest since late November as investors continued to rein in bets on Federal Reserve interest rate cuts.
Europe’s STOXX 600 index was 0.05% higher in early trading after falling 1.2% the previous week, while Germany’s DAX was up 0.38% but Britain’s FTSE 100 was 0.19% lower.
U.S. S&P 500 futures MESC1> were down 0.2% after the index fell 0.9% last week and Nasdaq futures were off by a similar amount.
Stock markets have made a rocky start to the second quarter as the risk of a broader conflict in the Middle East pushed up oil prices. Strong U.S. economic data has also added to investor concerns about how much central banks will be able to lower borrowing costs.
Oil prices fell on Monday, however, as geopolitical tensions eased somewhat after Israel withdrew more soldiers from southern Gaza. Talks on a truce are making progress in Cairo and all parties have agreed on basic points, Egypt’s state-affiliated Al-Qahera News TV channel reported.
Brent crude was last down 1.1% at $90.20 a barrel, after hitting a six-month high of $91.91 last week, when factors including a suspected Israeli attack on Iran’s embassy in Syria added to upward pressure.
“The price remains elevated overall though and together with tighter supply globally, there isn’t an immediate catalyst for the price to loosen,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
A much stronger-than-expected U.S. jobs report on Friday, which followed solid manufacturing data at the start of the week, caused investors to cut their bets on a June rate cut from the Fed.
Market pricing on Monday showed traders see a roughly 48% chance of a cut in June, down from around 59% a week ago.
The likelihood of rates staying higher for longer pushed 10-year U.S. Treasury yields to their highest since late November on Monday at 4.45%, up 7 basis points.
“The resilience of the U.S. labour market is calling the June cut into question,” said Mohit Kumar, chief Europe economist at Jefferies.
“While one should not attach too much importance to one payroll report…if the data remains robust we will have to rethink our June call.”
Investor focus this week will be on the U.S. consumer price index (CPI) report on Wednesday, which is expected to show core inflation, which strips out volatile energy and food prices, slowing to 3.7% in March from 3.8% the prior month.
If inflation data in the next two months show a downward trend, the Fed may still be open to a rate cut in June, said Vasu Menon, managing director of investment strategy at OCBC Bank in Singapore.
The European Central Bank sets interest rates on Thursday, with investors looking for a green light from officials that rate cuts will start in June after inflation slowed more than expected to 2.4% in March.
The U.S. dollar index was little changed at 104.33. But Japan’s yen remained under pressure, with the dollar up 0.2% and not far off its highest since 1994 at 151.89 yen, keeping traders on alert for possible intervention by Japanese authorities.
China mainland stocks reopened after extended holidays from Thursday, with the blue-chip gauge 0.88% lower. Hong Kong’s Hang Seng Index rose 0.07% while Japan’s Nikkei 225 climbed 0.91%
Spot gold hit a new record high at $2,353.80 an ounce, and was last up 0.3%.
(Reporting by Harry Robertson in London and Ankur Banerjee in Singapore; Editing by Shri Navaratnam and Himani Sarkar, Kirsten Donovan)
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