GLOBAL MARKETS-World shares dip as bond yields, commodities surge
* European shares sink
* Wall Street futures down 0.85%
* Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates http://tmsnrt.rs/2egbfVh
By Ritvik Carvalho
LONDON, Feb 22 (Reuters) – World shares sank on Monday asexpectations for faster economic growth and inflation batteredbonds and boosted commodities, while rising real yields madeequity valuations look more stretched in comparison.
MSCI’s All Country World Index, which tracks shares across49 countries, was down 0.25% by midday in London.
The pan-European STOXX 600 index was down 0.6%,hitting its lowest in 10 days. Germany’s DAX andFrance’s CAC 40, and Britain’s FTSE 100 fell0.5% each. Spain’s IBEX 35 index and Italy’s FTSE MIBlost 0.6% each.
S&P 500 futures fell to their lowest since Feb. 5, down0.85% on the day.
Bonds have been bruised by the prospect of a strongereconomic recovery and greater borrowing as President Joe Biden’s$ 1.9 trillion stimulus package progresses.
Federal Reserve Chair Jerome Powell delivers his semi-annualtestimony before Congress this week and is likely to reiterate acommitment to keeping policy super easy for as long as needed todrive inflation higher.
“The coming week is relatively thin on the internationaldata agenda, but after the recent rise in long bond yields, FedChairman Powell’s hearings in both chambers of Congress (Tuesday/ Wednesday) will be attracting great interest,” said ElisabetKopelman, U.S. economist at SEB.
“The fact that the most recent rise in long bond yields hasbeen driven by higher real interest rates and not just inflationexpectations increases the probability of a dovish message.”
European Central Bank President Christine Lagarde is alsoexpected to sound dovish in a speech later Monday.
Yields on 10-year Treasury notes have already reached 1.38%, breaking the 1.30% level and bringing the rise forthe year so far to a steep 43 basis points.
Analysts at BofA noted 30-year bonds hadreturned -9.4% in the year to date, the worst start since 2013.
“Real assets are outperforming financial assets big in ’21as cyclical, political, secular trends say higher inflation,”the analysts said in a note. “Surging commodities, energylaggards in vogue, materials in secular breakouts.”
Earlier in Asia, MSCI’s broadest index of Asia-Pacificshares outside Japan fell 1.18%, after slippingfrom a record top last week as the jump in U.S. bond yieldsunsettled investors.
Japan’s Nikkei recouped 0.8% and South Korea0.1%, but Chinese blue chips lost 1.4%.
A COPPER-PLATED RECOVERYOne of the stars has been copper, a key component of renewabletechnology, which shot up 7.7% last week to a nine-year peak.The broader LMEX base metal index climbed 5.5% on the week.
Oil prices have gone along for the ride, aided by tighteningsupplies and freezing weather, giving Brent gains of 22% for theyear so far.
On Monday, Brent crude futures were up 0.7% at$ 63.33 a barrel. U.S. crude added 0.7% to $ 59.65.
All of that has been a boon for commodity-linked currencies,with the Canadian, Australian and New Zealand dollars all higherfor the year so far.
Sterling reached a three-year top of $ 1.4050, aidedby one of the fastest vaccine rollouts in the world. Englandwill ease lockdown restrictions in five-week intervals, Sky Newsreported on Monday, hours before Prime Minister Boris Johnson isdue to announce details of his roadmap for re-opening thecountry.
The U.S. dollar index has been relatively range-bound, withdownward pressure from the country’s expanding twin deficitsbalanced by higher bond yields. The index was last at 90.342, not far from where it started the year at 90.260.
Rising Treasury yields has helped the dollar gain againstthe yen to 105.60, given the Bank of Japan is activelyrestraining yields at home.
The euro was steady at $ 1.2135, corralled betweensupport at $ 1.2021 and resistance around $ 1.2169.
One commodity not doing so well is gold, partly due torising bond yields and partly as investors question if cryptocurrencies might be a better hedge against inflation.
Gold stood at $ 1,795 an ounce, having started theyear at $ 1,896. Bitcoin was off 5.8% on Monday at$ 54,127, off a record high of $ 58,354.
(Reporting by Ritvik Carvalho; additional reporting by WayneCole in Sydney; editing by Larry King)