LONDON, June 28 (Reuters) - Global shares were steady on Friday after data showed that U.S. inflation was flat in May, helping to bolster investor hopes that the Federal Reserve will begin cutting interest rates in September.
S&P 500 futures and Nasdaq futures were firmer ahead of the opening bell on Wall Street.
The Fed's preferred inflation measure, the personal consumption expenditures (PCE) index, showed that annual growth in prices was 2.6% in May, as economists had expected, down from 2.7% in April.
The figures will come as a relief to the Fed, though still likely not be enough on their own to spur a cut in rates, said Michael Brown, senior strategist at Pepperstone.
"Should inflation continue to behave itself, and incoming data fall in line with the Federal Open Market Committee's forecasts, through the summer, the first 25 basis point cut remains on the cards as soon as September," Brown said.
Meanwhile, the yen's slide to a 38-year low fuelled expectations of intervention by the Japanese authorities to stem the weakness after a new foreign exchange diplomat was appointed.
Oil prices were on track for a third straight weekly jump on hopes of benign inflation figures to strengthen the Fed's hand to lower borrowing costs.
On the last trading day of the first half of the year, stocks hovered near recent record highs. The AI boom on Wall Street has helped the S&P 500 index rocket nearly 15% over the past six months, with hefty gains in Europe and Asia, too.
However, worries about the outcome of the two-stage French parliamentary elections that start on Sunday pushed the risk premium on French government bonds over German bonds to its widest since the euro zone debt crisis in 2012.
The political uncertainty in France, where the far right is leading, put the euro on course for its biggest monthly fall since January.
The MSCI All Country Stock Index (.MIWD00000PUS), opens new tab was firmer at 804 points, near its June 20 lifetime high of 807.17, and up about 10.5% for the year.
In Europe, the STOXX index (.STOXX), of 600 companies was little changed, cementing its 7% gain for the year, though down this month as French political uncertainty weighs.
Eren Osman, wealth management director at Arbuthnot Latham, said the stock market advance underpinned by tech majors and AI shares should continue to drive stocks into the second half.
"What we see is just a very clear narrative that the investment in that space is not going to slow down any time in the near term, so to bet against that as a theme and likely strong equity market performance is probably not a wise move," Osman said.
FRAGMENTATION
There was a muted response from the dollar and U.S. stock index futures to the U.S. presidential debate in which Democrat President Joe Biden stumble at times in a head-to-head with Republican rival Donald Trump ahead of the November election.
"We see a potential Trump administration as more positive for the dollar, both via looser fiscal policy and also via a more aggressive trade/tariff environment," ING analysts said after the debate.
HSBC economist Paul Bloxham said commodity markets face greater fragmentation and supply disruptions if Trump wins in November because that would be expected to prompt a rise in trade protectionism.
MSCI's broadest index of Asia-Pacific shares (.MIAPJ0000PUS), rose 0.2% and was on track to gain more than 3% for the month - its best performance since February.
Chinese markets, meanwhile, reversed early losses to trade higher, with China's benchmark CSI300 (.CSI300), last up 0.2% and Hong Kong's Hang Seng Index (.HSI), opens new tab up 0.56%. Investors had been concerned that Biden and Trump could tip a harder stance on China during their debate.
In currency markets, the dollar was heading for a monthly gain of nearly 1.4% against a basket of currencies .
The yen tumbled to a trough of 161.27 per dollar, its weakest since 1986, and was last trading at 160.555.
The Japanese currency has fallen 2.3% this month and more than 12% this year against a resilient dollar and continues to be hammered by stark interest rate differentials between the U.S. and Japan.
The yen's weakness, meanwhile, has been a boon for the Nikkei (.N225), which was last up 0.6% and heading towards a monthly gain of about 3%.
In commodity markets, gold was a touch firmer at$2,336 an ounce.
Brent crude oil futures rose 0.4% to $86.77 a barrel while U.S. West Texas Intermediate crude futures gained 0.38% to $82.05.
Reporting by Huw Jones in London Additional reporting by Rae Wee in Singapore and Stella Qiu in Sydney Editing by Kim Coghill, Jacqueline Wong and David Goodman
