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China CPI Jumps To 2.9% In February

Consumer prices in China were up 2.9 percent on year in February, the National Bureau of Statistics said on Friday.

That exceeded forecasts for 2.4 percent and was up sharply from 1.5 percent in January.

On a monthly basis, consumer prices jumped 1.2 percent following the 0.6 percent gain in January.

The bureau also said that producer prices advanced an annual 3.7 percent versus expectations for 3.8 percent and down from 4.3 percent in the previous month.

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COLOMBIA: Colcap Raises Slightly On Ecopetrol, Caution With Elections

Colcap, the main index of the Colombian Stock Exchange, added 0.41% to 1,480.56 points near Friday's closing, due to the rise of Ecopetrol's shares (+1.01%) in a session marked by a substantial business volume ahead.

The increase in Ecopetrol's stocks tracked the rebound in oil prices abroad.

Analysts at Davivienda Corredores noted that despite the slight rise, the Colombian index remains lagging behind the performance of other Latin American stock exchanges mainly because of the uncertainty for the legislative elections results.

On the business side, Avianca's shares rose by 1.13% despite reports that its subsidiary companies mobilized 2,320,638 passengers in February, 0.3% less than the passengers transported in the same month last year.

The locally traded U.S. dollar closed at 2,868.80 Colombian pesos, marking a 0.25% fall, due to the rebound in oil prices abroad.

"As long as oil prices remain close to US$ 60, the valuations will be limited. There was also a natural reaction before Sunday's legislative elections," said Wilson Tovar, an analyst at Acciones & Valores.

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Australia Business Confidence Slows In February - NAB

Business confidence in Australia ebbed in January, the latest survey from National Australia Bank revealed on Tuesday with an index score of +9.

That's still positive, which means that optimists outnumber pessimists - although it's down from the downwardly revised +11 in January (originally +12).

Business conditionals picked up steam as the index climbed to +21 from the downwardly revised +18 in the previous month (originally +19).

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UK Household Spending Touches 6-Year Low in 2017

Household spending weakened to its lowest annual growth for six years in 2017 amid Brexit-spurred inflation, with borrowing soaring and family savings plunging to a record low.

According to the Office for National Statistics, economic growth slowed to 0.4 percent in the final three months of last year, down from 0.5 percent in the third quarter as weaker household spending took its toll.

The ONS revised upgrowth for the year as a whole to 1.8 percent from the initial estimate of 1.7 percent, but this was still the lowest since 2012.

It leaves the UK with the lowest growth among the G7 economies at the end of 2017 as it enters the final year of its membership of the European Union.

The quarterly national accounts data showed Britons turned to debt to support spending in the face of last year's surging inflation, which outstripped meager wage growth.

The proportion of total income saved by households dropped to 4.9 percent in 2017, its lowest level since records began in 1963, the ONS said.

Overall household spending dropped the previous year to 1.7 percent, which was the lowest annual growth since 2011, according to the ONS.

In the fourth quarter, the current account deficit shrank to £18.4 billion, or 3.6 percent of GDP, down from £19.2 billion in the previous three months.

Net trade exports less imports made its largest contribution to full-year growth since 2011, the ONS reported.

Economists said there would be some relief on the way this year for households as wages are expected to start rising faster than inflation, which should help maintain growth in 2018.

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Feds Brainard Flags High Valuations Even after Stock Correction

Federal Reserve Governor Brainard said that even with this year's correction, equities and other assets are still high in valuation by historical standards.

In a speech shortly after the stock market closed and pared some of the deep losses incurred from Monday, Brainard became the latest U.S. central bank official to voice caution regarding the level of the nine-year-old-bull run in the stock market.

Brainard said that the valuations in a broad set of market appears elevated in relation to historical norms, even after pricing in recent movements.

Price tags on multi-family homes and commercial real estate properties have also increased, while capitalization rates, have hit historical lows, she added.

Aside from stocks and real estate, the Fed official also issued a warning regarding cryptocurrencies such as bitcoin, which have observed big price declines this year after its astronomical surge in 2017.

She also said there are few signs that cryptocurrencies would pose a widespread threat to the financial system. She also noted that corporate bond yields are low, while spreads on high-yield bonds over Treasuries are close to the low-end of their historical range.

Along with her warnings regarding possible over valuations in financial markets, Brainard said Fed policy has helped curb the type of excessive risk-taking that resulted in the financial crisis of 2008.

The Federal Reserve has been gradually tightening policy, raising the benchmark lending rate six time since December 2015, as it looks to prevent the economy from overheating.

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U.K. Economy Weighed Down by the Beast From the East Snowstorm

Heavy snow and weak consumer demand weighed on British services businesses in March, which grew at the slowest rate since just after the vote to leave the European Union in June 2016, a survey showed. However, the 'Beast from the East' may not be enough to stop the Bank of England from pushing another interest-rate increase.

The IHS Markit/CIPS services Purchasing Managers' Index (PMI) dropped to 51.7 in March from February's reading of 54.5, its lowest reading since July 2016.

Britain's construction PMI showed a similar decline on Wednesday, although manufacturing held up better.

Looking at the first three months of 2018 as a whole, the figures suggest Britain's economy expanded at a quarterly rate of just below 0.3 percent, down from an already-modest 0.4 percent at the end of 2017, IHS Markit said.

Reports this week showed snow and storms weighed on growth in services to its weakest in almost two years, and saw the construction industry contract for the first time in six months. While the pound fell after the services report, investors are still pricing in an around 85 percent likelihood of the BOE hiking rates in May.

The BOE has already factored in the hit from the bad weather, and downgraded its own estimate for the quarter. According to Markit, that means the Monetary Policy Committee's widely expected rate hike in May is still on the cards.

Not all the weakness in the PMI was weather-related, though.

IHS Markit said British services businesses reported weak consumer demand as well as concern about the country's departure from the EU in a year's time as being behind the slowest growth in new orders since July 2016.

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U.S. Automakers Shares Surge After Xi Announces Chinas plan to Reduce Car Tariffs

Shares of U.S. carmakers surged after Chinese President Xi Jinping announced the government's plans to open the country's economy and to reduce the tariffs on automobiles.

Tesla edged up 5.2 percent while Fiat Chrysler advanced 2 percent. Ford Motor increased 1.8 percent and General Motors increased 3.3 percent. China is an important market for U.S. carmakers. European automakers also rose, with BMW rising 3 percent.

GM sold over 4 million cars in China in the previous year for the first time, while Tesla increased its revenue by twofold from China to $2 billion in 2017.

Xi said that his plans include greatly lowering import tariffs on foreign autos and reducing duties of other products. At the Boao Forum for Asia, Xi said that China is planning to boost imports and reach a greater of balance of international payments under the present account.

The Chinese leader's comments come amid escalating trade tensions between Washington and Beijing. In a retaliatory move against America's tariff plans, China has unveiled its plan to impose fresh duties last week on 106 U.S. products, which then resulted in President Donald Trump threatening more duties.

This weekend, the U.S. softened its tone against China. On Sunday, Secretary Steven Mnuchin told CBS that a full-out trade war between the U.S. and China is not seen to take place. On the same day, Trump said that he will always have friendly ties with President Xi no matter the consequence of their trade conflict. He also said that China will roll down its Trade Barriers because it is the proper action to take.

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Trump Administration Weighs U.S. Options on Syria

U.S. President Donald Trump along with his administration's security aides mulled U.S. options on Syria, where he has threatened missile attacks in reaction to an alleged poison gas attack.

Concerns regarding a confrontation between Russia and the Western allies have been escalated since Trump said on Wednesday that missiles will be launched in response to a chemical gas attack in the Syrian town of Douma on April 7, and criciticized Moscow for siding with Syrian President Bashar al-Assad.

The U.S. leader cooled his heated remarks on Thursday and while he discussed his military options with allies such as Britain and France, who could participate in any U.S.-led strikes on Syria, there were indications of efforts to stop the crisis from going out of control. Trump has spoken to British Prime Minister Theresa May on Thursday, while he is due to speak with French President Emmanuel Macron.

Trump denied on Twitter that he said when an attack on Syria would occur, stating that it could happen 'very soon or not so soon at all'.

Later in the day, Trump convened with his national security team on the Syrian crisis. In a statement, the White House said that no final decision has been made and that they are continuing to evaluate intelligence and are in talks with partners and allies. But such statement did not necessarily indicate that Trump was pulling away from the idea of military action.

Global stock markets showed signs of recovery after Trump's hint that a military attack might not be imminent.

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China Makes Biggest Treasury Purchase in Six Months in February

China increased its Treasury holdings in February by $5.8 billion, its biggest purchase in six months. On the other hand, Japan's Treasury holdings fell.

According to the Treasury, China's Treasury holdings increased to just under $1.18 trillion. Foreign net buying of Treasurys was $43.2 billion for the month.

As trade tensions between the U.S. and China escalates, so has rumors that the Chinese government could reduce purchases of Treasuries or even sell some of its holdings. The Trump administration on March 1 announced tariffs on aluminum and steel, which affect China. The U.S. also announced its intention to put tariffs on $50 billion in Chinese goods, and Trump has since threatened to add tariffs to another $100 billion of goods.

In December, China's holdings of Treasuries stood at $1.18 trillion before falling to $1.17 trillion in January.

China is the biggest holder of U.S. Treasuries, with Japan coming in at second place. Japan's holdings declined by $3.6 billion, to a total of $1.06 trillion.

Buyers abroad also purchased $11.8 billion in agency debt and $4.1 billion of corporate debt. They reduced equity holdings by $1.2 billion

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UK Inflation Drops to 2.5%, its Lowest in a Year

UK inflation dropped in March to its lowest level in a year, raising questions over whether the Bank of England will raise interest rates in May.

The consumer price index (CPI) dropped to 2.5 percent in March from 2.7 percent in February, according to the Office for National Statistics. Economists had expected the annual rate of growth in prices to remain unchanged at 2.7 percent.

A smaller increase than is usual in the price of women's clothing was mainly responsible for the sharp decline, as well as the abolition of the Spring Budget, which meant there was no increase in alcohol and tobacco duty.

The decline in the headline inflation rate came from a fall in the rate of goods inflation from three percent in February to 2.4 percent in March. Goods prices are thought to be more sensitive to the exchange rate.

The sudden drop in inflation will lead investors to question whether the BoE will hike interest rates at its May meeting. However, many economists still expect the Bank of England, which had been forecasting CPI to average 2.9 percent over the first three months of 2018, to raise rates in May.

According to the most recent figures, UK wages increased by 2.8 percent in February.

Inflation has dropped in recent months as the impact of the sudden fall in the value of the pound after the EU referendum begins to fade. Having pushed up the cost of imported goods, the slide for sterling damaged the economy as squeezed consumers reined in their spending.

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Protectionism, Debt are Huge Threats to World Economy - EU

The largest threats to global economic expansion are government debt and protectionist tendencies, according to European Union economy commissioner Pierre Moscovici.

The two main risks for growth, which is now very solid all over the world, are on the one hand protectionism and trade tensions, and on the other hand debt, Moscovici said. There is no trade war for the time being, so that's good.

The IMF recently cautioned that the world's debt has swelled to a record $164 trillion, a trend that could make it more difficult for countries to respond to the next recession. Global public and private debt increased to 225 percent of worldwide economic output in 2016, the fund said on Wednesday in its semi-annual Fiscal Monitor report. The fund also cautioned that the global commercial order risked being torn apart by trade wars.

The global debt burden clouded the IMF's otherwise upbeat outlook of the world economy, which is in its strongest upswing since 2011. The fund expects growth of 3.9 percent in 2018 and 2019.

U.S. President Donald Trump is pushing for a crackdown on China and has announced tariffs on imports of steel and aluminum. The EU is seeking a permanent exemption from the metals levies after Trump granted a waiver to the bloc until May 1 and left open the possibility of a longer exclusion. The European Commission, the EU's executive branch in Brussels, has said that failure to gain a longer exemption from the U.S. metal-import duties would lead to a tit-for-tat response by the bloc.

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Odds of Fourth Interest Rate Hike in 2018 Surges to Almost 50 Percent

Chances of the Federal Reserve raising interest rates this year four times rose to almost 50 percent on the CME's FedWatch tracking tool, indicating that the market is finally coming around to the idea that the central bank will be raising interest at a faster pace than initially expected.

While some big forecasting Wall Street firms for months have been forecasting that the Fed will step up the pace of its monetary policy tightening, traders had been expecting three moves this year. The first increase has been approved in March, plus two more, potentially in June and September.

But fed fund futures market on Monday gave almost a 50 percent chance that the U.S. central bank would move one more time in December.

The CME's FedWatch tool, considered to be a reliable gauge of Federal Open Market Committee's actions, indicated 48.2 percent change of four rate hikes in early trade. The shift towards a more aggressive Fed came as the 10-year Treasury note yield hovered around 3 percent, which bond analysts have estimated would be a psychologically important level.

The odds had had been just 33 percent a month ago and less than 40 percent as of late last week.

In their latest forecast in March, FOMC members still indicated that there would be three increases in the funds rate this year. But with increasing indications of inflations accelerating and as the market starts to price in more moves, the committee could start to set its target higher.

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South Korea Consumer Confidence Weakens Further

South Korea's consumer confidence weakened for the fifth successive month in April, survey data from Bank of Korea showed Wednesday.

The consumer sentiment index fell to 107.1 in April from 108.1 in March.

Consumer sentiments regarding current living standards and their future outlook remained the same as in March, at 95 and 102 respectively. Consumer sentiment as to future household income and spending were dropped marginally in April.

The expected inflation rate over the following year was 2.6 percent.

The survey was conducted among 2,200 households between April 10 and 17.

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Australia Q1 Import Prices Rise More Than Expected

Australia's import prices increased at a faster-than-expected pace in the three months ended March, figures from the Australian Bureau of Statistics showed Thursday.

The import price index climbed 2.1 percent sequentially in the first quarter, following a 2.0 percent slight rise in the fourth quarter of 2017. It was the second consecutive quarterly increase.

That was above the 1.2 percent rise economists had forecast. The increase was driven by higher prices paid for petroleum, petroleum products and related materials, road vehicles, inorganic chemicals and plastics in primary forms.

On a yearly basis, imports prices grew at a faster rate of 2.3 percent in the March quarter, after a 1.4 percent gain in the December quarter.

Data also revealed that export prices rose 4.9 percent quarterly in the first quarter, following a 2.8 increase in the prior month. As compared to the corresponding period last year, the index dropped by 1.4 percent.

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U.S. Business Investment Cools; Labor Market Remains Strong

New orders for key U.S.-made capital goods dropped in March, pulled down by the biggest decline in demand for machinery in almost two years, and a fall in shipments implies that business spending on equipment cooled in the first quarter.

Separate data recently showed that the economy remains strong. The number of Americans filing for unemployment benefits dropped to the lowest level in over 48 years last week and the goods trade deficit narrowed sharply in March amid strong export growth.

According to the Commerce Department, orders for nondefense capital goods excluding aircraft, a closely watched proxy for business spending plans, fell 0.1 percent in March. Data for February was revised to show these so-called core capital goods rising 0.9 percent instead of the initially posted 1.4 percent jump.

In March, orders for machinery dropped 1.7 percent, the biggest decline since April 2016, after a gain of 0.3 percent in February. There were, however, increases in orders of primary metals, computers and electronic products, fabricated metals and electrical equipment, appliances and components.

Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, rose 2.6 percent in March as demand for transportation equipment rose 7.6 percent. That followed a 3.5 percent surge in durable goods orders in February.

Business spending on equipment likely cooled in the first quarter after double-digit growth in the second half of 2017. The moderation in investment in equipment is expected to have combined with a sharp slowdown in consumer spending to restrain economic growth in the first quarter.

Gross domestic product is likely to come in at 2 percent or less in the first quarter.

Nonetheless, signs are emerging that growth is likely to speed up in the spring, with GDP perhaps returns close to 3%. Companies are raising production and hiring at a rapid clip despite the lowest jobless rate since 2000. The rate of layoffs in April fell to the lowest level since 1969.

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Eurozone Economy Slowed in the 1st Quarter

The eurozone economy slowed in the first three months of 2018, heightening fears the currency union's post-crisis recovery is petering out.

Data from Eurostat showed a sharp slowing in economic activity. Having surpassed all expectations in 2017, the growth rate of the EU's currency area dropped to just 0.4 percent during the first three months of 2018, down from 0.7 percent for the final quarter of 2017.

On a year-on-year basis, the eurozone's GDP growth slowed from a rate of 2.8 percent to 2.5 percent.

The last time the region's growth was this slow was in the summer of 2016, returning the eurozone to its post-crisis state of nervousness over whether it could sustain healthy growth rates for a long period.

Measures of output in industry and construction, as well as figures for retail sales, had recently pointed toward slower growth.

Economists believe that an unusually cold and snowbound March in Northern Europe had some impact on growth, as did strikes in Germany and France. There was no breakdown yet from Eurostat on what caused the slowdown.

European Central Bank president Mario Draghi said last week that the bank would watch the data in the months ahead with caution. Draghi stressed, however, that policymakers remained optimistic that the region's economy would stay strong enough to support a rise in inflation closer to the ECB's goal of less than 2 percent.

Uncertainty about the economy is likely to weigh on the ECB's next big decision over when and how to end its bond-buying stimulus program.

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Trump Withdraws US from Iran Nuclear Deal, Renews Sanctions

President Donald Trump on Tuesday pulled the United States out of an international nuclear deal with Iran, raising the risk of conflict in the Middle East, upsetting European allies and casting uncertainty over global oil supplies.

Trump said in a televised address from the White House that he would reimpose U.S. economic sanctions on Iran to undermine a horrible one-sided deal that should have never, ever been made."

The United States will now reinstate all the sanctions it had waived as part of the nuclear accord, and it will impose additional economic penalties that are now being drawn up by the Treasury Department. Treasury Secretary Steven Mnuchin declined to specify what additional sanctions the United States might impose, but he expressed confidence that they would still be powerful even if other American allies did not follow suit.

The US president's decision intensifies the strain on the trans-Atlantic alliance, especially after European leaders made trips to Washington and repeatedly appealed to Trump to preserve the deal.

The leaders of Britain, Germany and France, which were signatories to the deal along with China and Russia, said in a joint statement that Trump's decision was a cause for regret and concern."

The response from Iran itself, however, was muted. President Hassan Rouhani said he believed the agreement could still survive but warned that he had instructed the country's atomic energy agency to prepare to restart uranium enrichment should the deal collapse completely.

Rouhani said Iran would remain committed to the deal agreed in 2015 between Iran and the US, UK, France, Germany, Russia and China.

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UK Factory Output Fell in March

Britain's manufacturing sector contracted during March, according to figures released by the Office for National Statistics, which emphasizes the sluggish economic performance in the first quarter.

While heavy snow storms swept through Britain in early March, the ONS reiterated its earlier statement that this had little overall impact on the economy's performance in the first three months of 2018.

Manufacturing output dropped 0.1 percent compared to the previous month as both domestic and export orders fell, the ONS said. Overall industrial output, which includes utilities and the UK's North Sea oil and gas fields, increased by 0.1 percent.

Manufacturing was broadly flat throughout the first quarter following several months of strong growth, with no evidence that the bad weather hampered UK factories as both domestic and international sales stalled. Machinery, transport and computer manufacturers all saw their output grow. This was largely offset by falling production of electrical equipment and oil refining, according to ONS head of national accounts Rob Kent-Smith.

A lack of clarity around Britain's terms of departure from the European Union in less than a year, as well as a slowing eurozone economy, are among reasons cited for Britain's disappointing performance of late.

The ONS said the impact from the recent data on its preliminary estimate of first quarter economic growth, which showed only a 0.1 percent quarter-on-quarter increase, was negligible.

Separate ONS data showed Britain's goods trade deficit with the rest of the world grew to 12.287 billion pounds in March from 10.414 billion pounds in February. Nonetheless, the ONS indicated that net trade was likely make a very small positive contribution to economic growth in the first quarter.

The ONS also published figures for construction output, which fell 2.3 percent on the month in March, after a fall of 1.0 percent in February.

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10-Year U.S. Yield Surge to Highest Level since 2011

The yield on the 10-year Treasury note rose on early Tuesday to reach levels since 2011 after a solid retail sales figures underlined the economy's stable momentum.

The rally in yield comes amid resurgent concerns that negotiations between the U.S. and China continue to be challenged, stoking concerns that a potential trade war could drive up prices and inflation higher- which has negative implication for bonds.

Yield on the 10-year Treasury note yield surged 7.5 basis points to 3.070 percent, the highest since July 2011, and notching its biggest single-day increase March 1, according to WSJ Market Data Group. The yield reached an intrasession high at 3.093 percent, according to FactSet data.

The 30-year bond yield rose 8.1 basis points to 3.210 percent, the biggest one-day increase since February 2. The short-dated two-year note yield rose 3.9 basis points to 2.585 percent, extending a yield move close to a decade peak.

The day's trading helped to increase the yield gap between two-year and the 10-year rate to 48.5 basis points.

The threat of increasing borrowing rates have given investors in risky assets a reason to pause, with the benchmark 10-year note again tested the yield level above 3 percent, which have previously caused friction in markets, challenging investors' appetite for assets perceived as risky against safe haven assets such as bonds.

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U.S. Labor Market Continues to Tighten

New applications for U.S. jobless benefits increased more than expected last week, but the number of people continuing to collect unemployment benefits fell to 1.71 million in the week ended May 5, the lowest since December 1973, which points to diminishing labor market slack.

Separate data also showed a pickup in mid-Atlantic factory activity this month, with manufacturers saying they were boosting employment and asking for higher prices for their products. The combination of a tightening labor market and firming inflation bolsters expectations the Federal Reserve will hike interest rates in June.

Initial claims for state unemployment benefits rose 11,000 to a seasonally adjusted 222,000 for the week ended May 12, the Labor Department said.

The labor market is viewed as being close to or at full employment, with the unemployment rate near a 17-½ -year low of 3.9 percent and within striking distance of the Fed's forecast of 3.8 percent by the end of this year. The U.S. central bank increased rates in March and forecast at least two more hikes for this year.

The number of people receiving benefits after an initial week of aid decreased 87,000 to 1.71 million in the week ended May 5, the lowest level since December 1973. Declining continuing claims underscore tightening labor market conditions and support economists' expectations that wage growth will accelerate in the second half of the year.

The labor market and regional factory data added to upbeat reports this week on consumer spending and industrial production in suggesting that economic growth was picking up early in the second quarter after slowing at the start of the year.

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Wall Street Gains as US-China Trade War Fears Ease

Stocks ended higher on Monday as trade tensions between the U.S. and China eased for the moment, while investor sentiment was also lifted by news of dealmaking activity.

The Dow Jones industrial average soared 298.20 points to 25,013.29. Boeing, Caterpillar and United Technologies, big exporters likely to benefit from easing trade tensions, were the best-performing stocks in the index. Monday also marked the first time since mid-March that the Dow closed above 25,000.

The S&P 500 rose 0.7 percent to 2,733.01 as industrials were up 1.5 percent. The Nasdaq composite gained 0.5 percent as 7,394.04 as semiconductors pushed tech higher.

U.S. Treasury Secretary Steven Mnuchin said on Sunday the United States and China had agreed to drop their tariff threats on billions of dollars worth of each country's goods, while China on Monday praised a significant dialing back of tensions.

Nine of the 11 major S&P sectors were higher, led by the technology sector's 1.21 percent gain. Apple, which counts China as major growth market, rose 1.4 percent, giving the biggest boost to the S&P 500 and the Nasdaq.

The industrial sector gained 1.20 percent, led by a 2.4 percent jump in Boeing, which sells about a fourth of its commercial aircraft to Chinese customers. Caterpillar gained 2.3 percent.

Wall Street also got a boost on Monday amid a slew of dealmaking news.

General Electric will merge its transportation business with Wabtec a rail equipment maker in a deal worth $11.1 billion. GE shares rose 2 percent.

Meanwhile, Fifth Third Bancorp agreed to buy MB Financial for $4.7 billion in cash and stock. MB Financial shares soared 12.9 percent.

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Fed Minutes Support Rate Hike in June

Federal Reserve officials at their meeting earlier this month signaled they were likely to raise their benchmark short-term interest rate at their June meeting, and they debated how to characterize an evolving policy strategy that soon would no longer try to stimulate economic growth.

Minutes from the meeting, which ended May 2, reveal Fed officials are on track to raise rates again in June. The minutes also indicate officials are less worried about inflation rising above 2 percent, its current level and the Fed's target rate, than they are about the rate of inflation dipping again.

Most participants judged that if incoming information broadly confirmed their economic outlook, it would likely soon be appropriate for the FOMC to take another step in removing policy accommodation, the minutes said.

The readout of the meeting included a call by some policymakers to revise the Fed's monetary policy statement soon to reflect that rates would be close or above long-run estimates before too long.

A number of Fed policymakers, including Chairman Jerome Powell, have been keen to stress they will tolerate inflation rising above the Fed's goal for a time without undue concern. This was reflected in the policy statement earlier this month, with explicit reference made to the 2 percent target being symmetric.

Fed policymakers at the meeting decided, as expected, to keep the benchmark overnight lending rate unchanged in a target range of between 1.50 percent and 1.75 percent.

Traders in the federal funds futures market currently see more than a 90 percent chance of a June rate hike.

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Energy Stocks Tumble as OPEC Considers Production Increase

Energy stocks in the Asia-Pacific region slid on Monday after news that producer cartel OPEC was mulling to increase production triggered oil prices to tank on Friday.

The S&P/ASX 200 Energy Index was last down 2 percent, at its lowest since April 26. Among the large producers, Beach Energy edged down 4.7 percent, Woodside Petroleum fell 2.7 percent, Santos edged down 2.4 percent and Origin Energy fell 1.9 percent. The decline in energy stocks weighed down the broader S&P/ASX 200 index by 0.4 percent.

In early trading in Tokyo, the energy sector of the Topix index was the underperformer, falling 3 percent, countering gains from the majority of other sectors and pulling the index into negative territory.

The pressure on energy stocks came after oil prices ended a gaining streak on Friday, with the Brent crude closing down almost 3 percent on the day after OPEC's de-facto leader, Saudi Arabia, and Russia said that they were mulling to ease curbs on production.

The option comes amid potential supply disruption risks from Venezuela and Iran, which are both under threat by U.S. sanctions.

Oil prices also continued to slide on Monday. The international benchmark Brent was off 0.5 percent at $76.04 per barrel and the U.S. WTI, the U.S. benchmark, fell 0.8 percent at $67.34. In recent weeks, both prices have been trading near their highest since late 2014 as the tension over Iran and Venezuela, as well as continued OPEC-led production cuts, propped up prices.

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U.S. Consumer Confidence Bounces Back, House Prices Rise

Consumer confidence bounced back in May, but households were a bit pessimistic regarding their short-term income prospects even as they expected strong job growth to persist, which could restrain consumer spending.

The Conference Board said its consumer confidence index increased 2.4 points to a reading of 128.0 this month from a downwardly revised 125.6 in April. The index was previously posted at 128.7 in April.

U.S. financial markets were little moved by the data amid a deepening political crisis in Italy. The dollar climbed to a 10-month high versus the euro, while U.S. Treasury yields dropped. Stocks on Wall Street fell, with the S&P 500 and Dow Jones Industrial Average hitting near three-week lows.

The Conference Board's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or difficult to get, rose to 26.6 in May, the best reading since May 2001, from 22.7 in April.

That measure, which closely correlates to the unemployment rate in the Labor Department's employment report, suggests that labor market slack continues to shrink.

However, consumers were less upbeat about their short-term income prospects. The share of consumers expecting an improvement in their income dropped to 21.3 percent in May from 21.8 percent in April. The proportion expecting a decline rose to 8.2 percent in May from 7.9 percent in the previous month.

A separate report showed the S&P CoreLogic Case-Shiller composite index of home prices in 20 metropolitan areas rose 0.5 percent in March after climbing 0.8 percent in February. House prices were up 6.8 percent in the 12 months to March after rising by the same margin in February.

The strong gains are at odds with recent data which had suggested a cooling in house prices. The Federal Housing Finance Agency reported last week that house prices were slightly higher by 0.1 percent in March from February.

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