Asia shares rally on hopes for more rate cuts this week

However, a surprisingly high reading for Euro zone inflationout last week blunted hopes for a rapid round of reductions and markets have 55 basis points of easing priced in for this year.

"The probability of back-to-back cuts now appears very low, putting the focus for a second move on September," said Bruce Kasman, head of economic research at .

"We suspect President Christine Lagarde will signal that the direction of rates is downward next week, but the policy statement will emphasize that future moves are data-dependent, and there is no pre-commitment to a particular rate path."

Markets also imply around an 80% chance the will cut at its meeting on Wednesday and 59 basis points of easing this year, though analysts are hopeful the easing will be even deeper.

Investors are a lot less dovish on the Fed, seeing little prospect of a move until September and even that is far from a done deal.

The outlook could change this week given data due includes key surveys on services and manufacturing, and the May payrolls report where unemployment is seen holding at 3.9% as 190,000 net new jobs are created.

The prospect of lower borrowing costs globally has been generally positive for equities, though disappointing from China somewhat soured the mood in .

's broadest index of Asia-Pacific shares outside Japan gained 0.3%, having slid 2.5% last week.

Japan's rose a further 1.0%, after rebounding from one-month lows on Friday.

Indian markets are waiting to see if Prime Minister will expand his alliance's majority in parliament when election results are released on Tuesday, amid speculation this would lead to more economic reforms.

Month-end flows saw Wall Street stage a late rally on Friday and left the up almost 7% for May. Early on Monday, S&P 500 futures were up 0.2%, with Nasdaq futures adding 0.1%.

In forex markets, the Japanese yen remains the weakest of the majors, though the government is clearly prepared to spend big to slow its slide. Data out last week showed Tokyo spent 9.788 trillion yen ($62.27 billion) on currency intervention between April 26 and May 29.

The dollar stood at 157.15 yen, just off last week's peak of 157.715. The euro held firm at $1.0852, still benefiting from the EU inflation report, but faces resistance at $1.0895. [FRX/]

Gold was steady at $2,326 an ounce, having now rallied for four months in a row helped in part by buying from and China. [GOL/]

initially eased after OPEC+ agreed on Sunday to extend most of its oil output cuts into 2025, though some cuts will start to be unwound from October 2024 onwards. [O/R]

Brent dipped 26 cents to $80.85 a barrel, while U.S. crude fell 22 cents to $76.77 per barrel.

($1 = 157.1900 yen)