* European shares open higher
* Dollar index holds near 2-week high after solid U.S.
retail data
* Investors await upcoming FOMC; BOJ, BOE also meet this
week
* ECB's Coeure says rates could be cut, QE restarted in euro
zone
* Bitcoin jumps to 13-month high
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Marc Jones
LONDON, June 17 (Reuters) - European shares tip-toed higher
alongside government bond yields on Monday, as investors braced
for what is shaping up to be a crucial week for global monetary
policy.
With the U.S. Federal Reserve likely to signal on Wednesday
whether it is readying its first interest rate cut since the
financial crisis and oil still choppy after last week's Gulf
tanker attacks O/R , most markets were hesitant first thing.
The focus was still the dollar's surge on Friday after
above-forecast U.S. industrial output and retail sales data and
upbeat consumer confidence soundings pushed back futures markets
expectations of any quick Fed rate cut.
The greenback held its gains as most major currencies trod
water /FRX , while the pan-European STOXX 600 index .STOXX
was also barely moved as a profit warning from Germany's
Lufthansa hit airlines and cancelled out a 0.8% rise in banking
stocks. .EU
"A (U.S.) rate cut this week seems extremely premature,"
said Royal Bank of Canada's Global Head of FX Strategy Elsa
Lignos.
"But the Fed can make some communications tweaks that at
least open up the possibility for a cut in July. The question is
how flexible that messaging will be."
Traders are pricing a high probability of a July rate cut,
despite there being unusually high uncertainty, particularly
around trade, Lignos added. She said a G20 meeting late this
month could also change the narrative again.
The main concern though is if tensions do continue, the
trade war could tip the U.S. and other economies into recession.
The dollar index against a basket of six major currencies
.DXY The index last stood at 97.510 near a two-week high,
while the euro EUR= fetched $1.1216, near the lower end of its
recent trading range. /FRX
With lond-term inflation expectations at an all-time low
again, euro zone bond yields held close to their multi-year
trough, despite inching fractionally higher early on. GVD/FRX
European Central Bank board member Benoit Coeure said in an
interview that the bank's already sub-zero interest rates could
be cut again if needed. It could also restart the quantitative
easing programme it wound down at the end of last year.
"The question is not whether we have instruments; we do have
instruments. We can change our guidance. We can cut rates. We
can restart QE," Coeure told the Financial Times. "The question is which instrument, or combination of
instruments, would be best suited to the circumstances."
HONG KONG
The dollar index against a basket of six major currencies
.DXY climbed to 97.583 on Friday, its highest level in almost
two weeks, after the U.S. retail sales data eased fears that the
world's largest economy is slowing sharply.
The index last stood at 97.510, while the euro EUR=
fetched $1.1216, near the lower end of its weekly trading range.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS had ended slightly weaker overnight while
Japan's Nikkei average .N225 had closed flat.
The Bank of Japan is widely expected to reinforce its
commitment this week to a massive stimulus program for some time
to come. There had been something of boost from Hong Kong's Hang Seng
Index .HSI which finished 0.4% higher. At the weekend, the
territory's leader Carrie Lam backed down over a bill that would
have allowed extradition to China. The Hang Seng fell for three sessions in a row through
Friday, after the extradition bill triggered mass protests and
some of the worst unrest seen in the territory since Britain
handed it back to Chinese rule in 1997.
"Last week the issue looked as if it would become another
thorny point between the United States and China. As the bill is
now being postponed indefinitely, things will likely calm down,
which is good for markets," said Hiroyuki Ueno, senior
strategist at Sumitomo Mitsui Trust Asset Management.
Mainland Chinese shares traded within a tight range, with
the benchmark Shanghai Composite .SSEC up 0.2% and the
blue-chip CSI 300 .CSI300 barely budging.
U.S. Secretary of State Mike Pompeo told Fox News on Sunday
that President Donald Trump would raise the issue of Hong Kong's
human rights with China's President Xi Jinping at a potential
meeting of the two leaders at the G20 summit in Japan later this
month.
Geopolitical tensions in the Middle East added another layer
of uncertainty after the United States blamed Iran for attacks
on two oil tankers in the Gulf of Oman last week. U.S. Secretary of State Pompeo said Washington will take all
actions necessary to guarantee safe navigation in the Middle
East, though oil prices slipped again as worries about the
broader slowdown in the global economy returned. O/R
Brent futures LCOc1 fell 25 cents, or 0.4%, to $61.76 a
barrel by 0900 GMT, after gaining 1.1% on Friday while logging
their fourth consecutive weekly fall.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were
down 22 cents, or 0.4%, at $52.29, having firmed by 0.4% in the
previous session.
"Today, oil markets will have to digest more demand concerns
as India implemented retaliatory tariffs on a number of U.S.
goods yesterday," consultancy JBC Energy said in a note.
Also sapping prices was the dim outlook for oil demand
growth in 2019 projected by the International Energy Agency
(IEA) on Friday, citing worsening prospects for global trade.
Bitcoin BTC=BTSP jumped overnight to $9,391.85, its
highest level in 13 months. It was last quoted at $9,195.62, up
2.4%.
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Trade tensions boost U.S. rate-cut expectations png https://tmsnrt.rs/2KdE2by
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