NEW YORK, Sept 11 (Reuters) - Wall Street advanced and the dollar retreated on Monday, as investors looked ahead to Wednesday's inflation data and the Bank of Japan suggested it could be moving toward closing the door on an era of negative interest rates.
All three major U.S. stock indexes were modestly higher in early trading, rebounding from the prior week's net losses, with electric automaker Tesla Inc providing the most upside lift.
"September is seasonally a tough month for equities but on balance things looked better than people feared," said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. "We’re unlikely to see high levels of conviction from investors that will drive a market rally this month. There’s also no reason to be overly fearful."
The relatively quiet session appeared to be the calm before a storm of U.S. economic data this week, with Wednesday's crucial consumer prices report (CPI) paramount.
Analysts expect inflation to have heated up last month, driven by rising oil costs. Core CPI, which strips away volatile food and energy prices, is seen cooling on an annual basis.
The hotly anticipated CPI data will give market participants a snapshot of August inflation, and could provide some illumination regarding the duration of the U.S. Federal Reserve's restrictive policy cycle.
The Fed, which has left the door open to further interest rate hikes, has pledged to remain agile in its response to economic data.
Financial markets have essentially baked in a rate pause at the conclusion of its September 19-20 monetary policy meeting, beyond which the path grows less certain, according to CME's FedWatch tool.
Elsewhere, comments from Bank of Japan (BOJ) Governor Kazuo Ueda raised the possibility that Japan could begin moving away from its era of negative interest rates.
The Dow Jones Industrial Average rose 126.62 points, or 0.37%, to 34,703.21, the S&P 500 gained 20.71 points, or 0.46%, to 4,478.2 and the Nasdaq Composite added 67.71 points, or 0.49%, to 13,829.24.
European shares advanced on signs of economic stabilization from Beijing as investors looked ahead to the European Central Bank's policy meeting on Thursday along with the U.S. CPI report.
The pan-European STOXX 600 index rose 0.41% and MSCI's gauge of stocks across the globe gained 0.56%.
Emerging market stocks rose 0.45%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.38% higher, while Japan's Nikkei lost 0.43%.
The dollar edged lower against a basket of world currencies, as traders looked for hopeful signs of an economic "soft landing," while the Yen surged following Ueda's comments.
The dollar index fell 0.59%, with the euro up 0.48% to $1.075.
The Japanese yen strengthened 1.01% versus the greenback at 146.35 per dollar, while Sterling was last trading at $1.2543, up 0.63% on the day.
U.S. Treasury yields inched higher in anticipation of the CPI report.
Benchmark 10-year notes last fell 8/32 in price to yield 4.288%, from 4.256% late on Friday.
The 30-year bond last fell 23/32 in price to yield 4.3753%, from 4.332% late on Friday.
Oil prices reversed an earlier dip, resuming their uphill climb due to supply concerns arising from Saudi and Russian output cuts.
U.S. crude rose 0.14% to $87.63 per barrel and Brent was last at $91.04, up 0.43% on the day.
Gold prices headed higher in opposition to the greenback.
Spot gold added 0.2% to $1,922.50 an ounce.
Reporting by Stephen Culp; Additional reporting from Amanda Cooper in London, Editing by William Maclean