(Updates throughout, refreshes prices at 0823 GMT)
Global shares rose while the dollar retreated on Wednesday, after a hot reading of U.S. wholesale inflation set a nervous tone for trading ahead of the consumer price report that could prove decisive in when the Federal Reserve cuts interest rates.
The frenzy in so-called meme stocks entered a third day, with shares in AMC AMC.N and GameStop GME.N soaring by more than 25% in premarket trading.
The MSCI All-World share index .MIWD00000PUS traded at a record high, up 0.15% on the day, which brought gains for 2024 so far to 8.3%.
Price action was more subdued as investors were reluctant to push any market too aggressively one way or another ahead of the monthly U.S. consumer price index later in the day.
In European trading, the STOXX .STOXX rose 0.3%, buoyed largely by healthcare shares, while U.S. stock futures ESc1 NQc1 were broadly flat on the day, indicating a more muted start on Wall Street, where activity the previous day centred on the meme-stock rally.
The boom has drawn parallels with the meme-stock craze that gripped markets in early 2021, where retail traders, using trading platforms and social media investment advice pumped up the value of stocks that many large investors had bet heavily against.
"I wonder whether this is a bit of speculative excess and reality will eventually kick in perhaps with CPI today," Pepperstone strategist Michael Brown said.
"The bar is very high for the market to dramatically reprice in a hawkish direction," he said, referring to the chances of a rise in U.S. rates this year.
Investors do not anticipate any rate hikes in 2024, but they have had to dial back their expectations for rate cuts, given how sticky inflation is. They currently price in 43 basis points in cuts by December, compared with 150 bps in cuts anticipated at the start of 2024.
Data overnight showed U.S. producer prices increased more than expected in April, indicating that inflation remained stubbornly high early in the second quarter.
HOT OR NOT? Fed Chair Jerome Powell called the PPI data "mixed" rather than "hot" because the prior month's data was revised lower.
"Market anticipation of rate cuts has been building recently based on weaker-than-expected U.S. labour market data, but if prices don't follow suit, then rate-cut hopes will be dashed," said Ryan Brandham, head of global capital markets, North America at Validus Risk Management.
CPI is expected to have risen by 0.4% in April, matching March's increase, according to a Reuters poll.
Powell reiterated his message of caution over rate cut expectations, although the Fed chief, along with Cleveland Fed President Loretta Mester, poured cold water over the notion of rate hikes, ING economists said.
"That doesn't necessarily sound like someone who is expecting a great CPI number today."
In China, stocks eased with the blue-chip index .CSI300 down 0.27%, weighed down by fresh U.S. tariffs on Chinese goods, which in turn knocked iron ore prices lower.
U.S. President Joe Biden unveiled a bundle of steep tariff increases on an array of Chinese imports including electric vehicles, computer chips and medical products.
In the currency market, the dollar held steady ahead of the CPI report, with the euro EUR=EBS rising 0.1% to a one-month high of $1.0833.
The dollar index =USD , which measures the U.S. currency against six others, was down 0.2% at 104.86. The yen JPY=EBS was last at 155.97 per dollar, around its weakest in two weeks, keeping traders wary of more intervention from Japanese authorities.
The yen touched a 34-year low of 160.245 per dollar on April 29, triggering rounds of aggressive yen-buying that traders and analysts suspect was the work of the Bank of Japan and Japanese finance ministry.
In commodities, oil prices edged higher as large wildfires threatened Canada's oil sands and ahead of an expected drop in U.S. crude oil and gasoline inventories.
U.S. crude CLc1 was up 0.6% at $78.47 a barrel, while Brent crude LCOc1 was up 0.5% at $82.78.
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