(Reuters) -Asian shares eked out a 15-month high on Monday in a week where inflation figures could make or break hopes for earlier U.S. rate cuts, while Chinese activity data will test optimism about a sustained recovery in the world's No. 2 economy.
Beijing has already reported a welcome pickup in inflation to an annual 0.3% in April, helping to soothe worries about a slide into prolonged deflation. Forecasts favour further gains in April retail sales and industrial output due on Friday.
Chinese authorities are also set to sell 1 trillion yuan($138.24 billion) in longer-dated bonds to help fund stimulus spending at home.
The improved sentiment has helped lift Chinese blue chips to a seven-month high. The index was 0.1% softer on Monday with some sectors pressured by reports the White House was about to release details of new tariffs on Chinese goods.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1%, after rallying for three weeks straight.
Japan's Nikkei slipped 0.3%, still saddled with speculation further losses for the yen could lead the Bank of Japan to raise rates in the next few months.
The central bank sent a hawkish signal to markets on Monday by cutting the amount of Japanese government bonds it offered to buy in a regular operation, pushing yields up.
Globally, much now depends on whether the U.S. April inflation report will show a moderation after three months of upside surprises. Median forecasts are for core consumer prices to rise 0.3% in the month, compared with 0.4% in March, pulling the annual rate down to 3.6%.
So crucial is the data that rounding to the second decimal place could make all the difference.
"Our unrounded core CPI forecast at 0.27% m/m suggests larger risks for a dovish surprise to a rounded 0.2% increase," noted analysts at TD Securities.
A low number would likely boost bets the Federal Reserve could ease as soon as July, which is currently priced at only a 25% chance. Equally, a high inflation print could push a rate cut out past September and challenge pricing for 42 basis points of easing this year.
Also due are figures on U.S. producer prices, retail sales and jobless claims, along with final reports on European inflation that should reinforce expectations for a June rate cut from the European Central Bank.
There are a host of Fed speakers this week to update markets on their thinking, including Fed Chair Jerome Powell who appears with the head of the Dutch central bank on Tuesday.
UPBEAT US EARNINGS
EUROSTOXX 50 futures added 0.1%, while FTSE futures dipped 0.2%. S&P 500 futures and Nasdaq futures were both up around 0.1%, after rallying last week as company earnings came in strong.
With 80% of the S&P 500 having reported results, companies are on track to have increased earnings by 7.8%, well ahead of the April expectation of 5.1%.
Once Nvidia (NASDAQ:NVDA) reports on May 22, quarterly earnings from so-called Magnificent Seven firms are on track to jump 49%, according to Tajinder Dhillon, senior research analyst at LSEG.
Companies reporting this week include Walmart (NYSE:WMT), Home Depot (NYSE:HD) and Cisco (NASDAQ:CSCO).
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