Stocks edge higher as inflation data looms

Global stocks have edged higher, underpinned by hopes inflation is being tamed enough to ease the pace of interest rate hikes and reduce the chances of deep recession.

As investors waited for Thursday's United States consumer price index (CPI), the dollar was steady, while gold scaled an eight-month peak on bets the US inflation data will show a slowdown in price increases.

Crude oil prices shrugged off early losses to move higher, while copper prices held near six-month highs on optimism over economic reopening of top consumer China.

Stocks continued to build upon their gains for 2023 as investors hope there will be no repeat of last year's rout and that any economic recession will be shallow or even avoided.

The MSCI all-country stock index was up 0.11 per cent, adding to the year's gain of almost three per cent after an almost 20 per cent slide in 2022.

"We are having a warmer winter, recession risks are diminishing and consequently there is a perception that things might not be as bad - and that is what is driving equity markets higher, particularly in Europe," said Mike Hewson, chief markets analyst at CMC Markets.

"We are waiting for the US CPI data and it's very premature to suggest we could continue in this positive vein over the coming weeks," Hewson said.

In Europe, the STOXX index of 600 companies was up 0.44 per cent, back at levels seen around mid-2022.

Mark Tinker, chief investment officer at Toscafund asset management in Hong Kong, said that after the bear market of 2022, investors were tussling with whether there will be further downside this year before markets stabilise.

"What we have now got is the division of opinion - have we got a second leg coming?" Tinker said, adding this was leading investors to put small bets in markets, helping to set the more positive tone.

"There is no real dominant conviction to it yet. Right now people are tilting a bit away from there's going to be a second leg," he said.

The US earnings season moves into higher gear on Friday with results from big banks, such as Bank of America, JPMorgan Chase, Wells Fargo and Citigroup to offer clues on the economic outlook.

Investor attention is squarely on the US consumer price data on Thursday.

The figures are expected to show December's headline annual inflation at 6.5 per cent, down from 7.1 per cent in November.

Thursday's data will be crucial in determining what the Fed is likely to do with interest rates in its next meeting at the start of February.

Fed Chair Jerome Powell, in a speech on Tuesday, refrained from commenting on rate policy but said the Fed's independence was essential for it to battle inflation, leading US stocks to end higher.

"With some expectations that Powell would likely push back on easing financial conditions, equity markets celebrated the lack of any clear guidance on policy direction," Saxo strategists said.

ING bank said business surveys point to a slowing US economy and, if inflation allows, the Fed will be in a position to ease policy later this year.

Fed Governor Michelle Bowman said on Tuesday the central bank would have to raise interest rates further to combat high inflation and that would likely lead to softer job market conditions.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3 per cent, touching a six-month high, while Japan's Nikkei gained one per cent.

Australia's S&P/ASX 200 index rose 0.90 per cent.

Hong Kong's Hang Seng index rose 0.5 per cent, lifted by hopes of a strong economic rebound from the COVID-19 pandemic and discounted values of stocks.

In the foreign exchange market, the Australian dollar was 0.3 per cent higher after data showed the annual pace of inflation had increased to 7.3 per cent in November.

The dollar index, which measures its performance against six major currencies, was flat at 103.26, hovering close to a seven-month low.

The Japanese yen was up 0.2 per cent at 132.5 per dollar, while sterling was last trading at $US1.2148 ($A1.7557), slightly weaker on the day.

The yield on 10-year Treasury notes was lower at 3.563 per cent while the yield on the 30-year Treasury bond was down at 3.6907 per cent.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down at 4.217 per cent.

US crude was up 0.65 per cent at $US75.64 ($A109.32) per barrel and Brent gained 0.75 per cent to $US80.68 ($A116.61).