European stock indexes have been mostly in the red in early trading, falling from record highs as traders grapple with uncertainty over the economic outlook and await US inflation data.

US stocks edged down on Monday from recent highs on Friday in a move analysts attributed to profit-taking after US payrolls data presented a mixed picture but maintained expectations for a Federal Reserve rate cut in June.

Traders are now focused on US inflation data due on Tuesday, which could change expectations for when major central banks will begin cutting rates.

At 0948 GMT on Monday, the MSCI World Equity index was down 0.2 per cent on the day, having hit a new all-time high on Friday.

The pan-European STOXX 600, which also hit an all-time high on Friday, was down 0.5 per cent. 

London’s FTSE 100 was down 0.3 per cent and Germany’s DAX was down 0.7 per cent.

Amelie Derambure, senior multi-asset portfolio manager at Amundi, said that Monday’s downturn could be due to uncertainty about the economic outlook, and high valuations in stocks.

“There are some elements on the macro outlook that are maybe not as clear as one was willing to believe,” she said.

Comments from Fed Chair Jerome Powell and European Central Bank policymakers last week raised expectations that interest rate cuts will begin in summer, helping push stock indexes to new highs.

Derambure said there was “fatigue” in stocks, pointing to a split in the trajectories of the so-called “Magnificent Seven” group of US technology stocks, which have rallied strongly in recent years. 

A slump in Tesla this year has seen it diverge from the group.

“To us, there are some excesses in the markets so we want to be a bit more cautious on that front,” she said.

“We believe it’s all priced for perfection and the reality might be slightly different.”

Tuesday’s US consumer price index (CPI) report for February is forecast to rise 0.4 per cent for the month and keep the annual pace steady at 3.1 per cent.

Core inflation is seen rising 0.3 per cent, which will nudge the annual pace down to the lowest since early 2021 at 3.7 per cent.

US Treasury yields have declined in recent weeks, as hopes for a rate cut put downward pressure on yields. 

The US 10-year yield was down three basis points at 4.0672 per cent.

Euro zone government bond yields were mostly lower, with German 10-year yield steady at 2.258 per cent after last week’s biggest weekly fall since December.

The US dollar index was flat at 102.68, having dropped more than 1.0 per cent last week, and the euro was steady at $US1.0937 ($A1.6531)5.

The yen edged higher as Reuters reported that a growing number of Bank of Japan policymakers are warming to the idea of ending negative rates this month.

The dollar was down 0.4 per cent against the yen, with the pair at 146.52.

Data released on Monday showed Japan was not in recession after economic growth was revised up to an annualised 0.4 per cent for the December quarter.

Chinese stocks gained after data over the weekend showed a bounce in inflation. 

China also said it would improve home sales in a “forceful” and “orderly” way, as the country’s beleaguered residential property market remains troubled by weak demand.

Oil prices recovered, having fallen last week due to concerns about slow demand in China.

Brent futures were up 0.4 per cent at $US82.42 ($A124.58) a barrel, while US West Texas Intermediate (WTI) was up 0.35 per cent at $US78.28 ($A118.32) a barrel.

The decline in the dollar and bond yields has been supportive of non-yielding gold which was up at $US2,180.63 ($A3,296.05) an ounce, having surged 4.5 per cent last week to record peaks. 

Cryptocurrency bitcoin hit a new all-time high at $US71,836 ($A108,581).

This post was originally published on Michael West.