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Global stocks rose on Monday, despite Beijing's denial that it would consider easing its zero COVID-19 policy, which diverted investor flows away from the dollar ahead of potentially pivotal consumer inflation data this week.

Risk assets bounced on Friday due to speculation China was preparing to relax its pandemic restrictions, but over the weekend health officials reiterated their commitment to the "dynamic-clearing" approach to COVID cases as soon as they emerge.

"We can question whether the China story has any veracity, but the market is quite happy to give it credence for the moment, despite the big denials," CIBC Capital Markets head of G10 currency strategy Jeremy Stretch said.

The dollar came under pressure for a second day, as traders latched on to the idea that China could temper some of its restrictions, after the government on Monday indicated it will make it easier for people to enter and exit the capital.

The dollar dropped against other major currencies, pushing the pound up by 0.8% to $1.1457 and boosting the euro by 0.2% to near-parity at $0.9980.

S&P 500 and Nasdaq futures edged higher, rising by 0.2% and 0.3%, respectively.

The biggest macroeconomic risk event this week will be the U.S. October consumer price index (CPI), which could influence investor expectations for the likely course of Federal Reserve monetary policy.

Fed Chair Jerome Powell quashed speculation last week that the central bank could slow the pace of its rate rises, saying interest rates would likely stay higher, for longer.

On Friday, the October employment report showed much faster job growth than expected, but slower wage growth and a rise in the unemployment rate, suggesting some of the tightness in the labour market may be easing.

MEDIAN FORECASTS

For Thursday, median forecasts are for annual inflation to slow to 8.0% and for the core to dip a tick to 6.5%.

"If we can see a moderation in core CPI, which I think might be a little bit to imply that, but I think if we do see that, it will encourage this correction to run a little bit further," CIBC's Stretch said.

Speculation that China, the world's largest commodity consumer, might open its economy lifted copper by 7% on Friday in its biggest one-day rally since 2009, while oil rose by more than 4%.[MET/L] [O/R]

Four Federal Reserve policymakers on Friday indicated they would consider a smaller interest rate hike at their next policy meeting, sounding less hawkish than Chair Jerome Powell.

There are at least seven Fed officials scheduled to speak this week, which will help refine the rate outlook with markets now narrowly leaning toward a half-point rate hike next month to 4.25-4.5%.

"I don’t think the market will do much ahead of U.S. inflation data," said Massimiliano Maxia, senior fixed income specialist at Allianz Global Investors.

"Markets expect a (Fed) rate hike of 50 bps in December and 25 bps early next year, but they are ready to change their view pretty quickly if consumer price numbers surprise on the upside," he added.

Two-year Treasury yields, most sensitive to inflation and interest rate expectations, were last up 6 basis points on the day at 4.711%, off Friday's 2007 peak.

Also of note will be midterm U.S. elections on Tuesday where Republicans could win control of one or both chambers and lead to deadlock on fiscal policy.

Meanwhile, oil eased, surrendering some of last week's gains. Brent crude fell 0.7% to $97.96 a barrel, as did U.S. crude, to $91.91 a barrel.