* European shares stutter as COVID restrictions weigh
* China blue chips gain over 2%, PBOC adds more loans
* Nikkei slips as Japan reports record drop in GDP
* Rise in long-term U.S. yields offers some support to
dollar
* Gold firms after suffering worst week since March
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Marc Jones and Wayne Cole
LONDON/SYDNEY, Aug 17 (Reuters) - Shares crept back toward
recent peaks on Monday as Chinese markets swung higher, while
investors waited to see if a recent sell-off in longer-dated
U.S. Treasuries would be extended and perhaps take some pressure
off the dollar.
Europe warmed up to the new week slowly but had just about
enough strength alongside Wall Street futures .ESc1 .N to
keep MSCI's main world shares index .MIAPJ0000PUS clawing
towards February's record top. .EU
Chinese blue chips .CSI300 had led the way with gains of
2.35% as the country's central bank provided more medium term
loans to the financial system.
Beijing also granted a patent for CanSino Biologics
6185.HK COVID-19 vaccine candidate Ad5-nCOV. But Tokyo's Nikkei .N225 fell 0.6% as Japan became the
latest country to confirm its biggest economic contraction on
record and a retightening of COVID measures in Italy contributed
to Europe's laboured session. Rabobank strategist Bas Van Geffen said the past few months
had seen optimism build about a strong economic bounce-back, but
the reimposition of restrictions was an indication of
challenges.
"We have already cautioned that this is not going to be a V-
shaped recovery ... and perhaps this is a sort of a sign to the
markets that it is not going to be (a quick recovery)", Van
Geffen said.
The U.S. second-quarter earnings season wraps up with major
retailers reporting this week including Walmart WMT.N , Home
Depot HD.N and Kohls KSS.N .
Sino-U.S. relations remain a sticking point with U.S.
President Donald Trump on Saturday saying he could exert
pressure on more Chinese companies such as technology major
Alibaba BABA.N after he moved to ban TikTok. SHIPMENTS
Balancing that, U.S. crude oil shipments to China look set
to rise sharply in coming weeks, and news that a scheduled
review of the U.S.-China Phase-One trade deal over the weekend
had been postponed indefinitely didn't elicit much reaction.
Trump said in an interview with Fox as markets prepared to
open there that Beijing was "more than" living up to trade deal,
citing its corn, soybean and beef orders. The highlight of the economic calendar will be the release
of minutes from the U.S. Federal Reserve's last policy meeting.
"Market participants will be looking for insight into the
details and exact timing of when the Fed's Monetary Policy
Review will be completed, and also for more clarity with respect
to the potential timing and structure of any changes to forward
guidance," noted analysts at NatWest Markets.
Speculation is rife the Fed will adopt an average inflation
target, which would seek to push inflation above 2% for some
time to make up for the years it has run below that level.
That combined with massive new debt supply caused a sharp
increase in longer-term bond yields last week, with 30-year
yields US30YT=RR rising 21 basis points as the curve
steepened.
RECENT TROUGH
As that lift in yields stalled on Monday so did the respite
for the dollar after weeks of losses. Against a basket of
currencies the dollar was a fraction lower at 92.971 =USD ,
still uncomfortably close to the recent trough of 92.521.
The euro EUR= flattened out a little late last week,
having met resistance around the two-year peak of $1.1915. Yet
it still ended the week with a gain of 0.5% and had shuffled
back up $1.1855 on Monday, even as European bond yields dipped
again. GVD/EUR
The moves took Italian 10-year yields IT10YT=RR down two
basis points to 1.03%, compressing the closely watched
Italy-Germany spread to 144.4 basis points, the tightest since
February when the COVID spread was just taking hold.
"Investors strategically long EUR/USD should stick to the
position," said CBA forex analyst Elias Haddad. "Greater
Eurozone fiscal solidarity, real two-year swap rate
differentials and relative central bank balance sheet trends
between the Eurozone and the U.S. suggest the fundamental
uptrend in EUR/USD is intact."
The single currency has also made a notable break higher on
the yen EURJPY= to reach ground not trodden since April 2019.
Indeed, the yen fell against most of its peers last week, though
it muscled the dollar back to 106.25 yen JPY= on Monday.
In emerging markets Belarus's political crisis saw its bonds
fall along with Russia's rouble, while in commodities, gold
firmed to $1,956 an ounce XAU= after the jump in bond yields
saw it lose 4.5% last week in its worst performance since March.
GOL/
Oil prices stumbled though after edging ahead on hopes for
Chinese demand and after data showed crude oil, gasoline, and
distillate inventories all declined in the week ended Aug. 7.
O/R
Brent crude futures LCOc1 drooped to $44.55 from $45.13 a
barrel, while U.S. crude CLc1 dipped to $41.89 from $42.39.
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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
World stocks and oil vs COVID-19 https://tmsnrt.rs/2CzO5pX
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