GLOBAL MARKETS-Inflation fears stalk stocks

(Updates throughout)
* MSCI's global stock gauge down for third straight day
* Markets await U.S. inflation report at 1230 GMT
* U.S. Treasury yields in tight range
* World FX rates https://tmsnrt.rs/2RBWI5E

By Tom Arnold and Swati Pandey
LONDON/SYDNEY, May 12 (Reuters) - A sell-off in global
shares extended to its longest losing streak in two months on
Wednesday as surging commodity prices and growing inflationary
pressure in the United States prompted bets on earlier interest
rate hikes and higher bond yields.
A limited equity market recovery emerged in European early
trade, with the continent's shares STOXX 600 .STOXX index
adding 0.4% after Tuesday's slump.
London's FTSE 100 .FTSE led the way, buoyed by data
showing Britain's pandemic-battered economy grew more strongly
than expected in March. MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS slumped 0.9%, having earlier touched its lowest
since March 26.
After hitting fresh record highs earlier in the week, MSCI's
gauge of stocks across the globe .MIWD00000PUS was 0.2% down,
its third consecutive day of losses, the longest-running streak
since March 4.
Investor focus was locked on the U.S. consumer price index
report to be released by the U.S. Labor Department at 1230 GMT,
with analysts expecting a 3.6% lift in year-on-year prices,
boosted by last April's low base.
U.S. Treasury yields remained stuck in a tight range. The
yield on benchmark 10-year Treasuries US10YT=RR drifted lower
to 1.6130%, below the recent peaks of late March levels and far
from the 1.9% level at the start of 2020 before the coronavirus
pandemic. US/
Euro zone bond yields held below recent highs touched on
Tuesday. Germany's 10-year yield was down 1 basis point to
-0.17%, after rising to the highest since March 2020 at -0.152%
on Tuesday. L8N2MZ2TU
Analysts said a combination of inflation fears and some
investors cutting their exposure to overstretched stocks or
sectors was behind the recent downturn.
"It's a battle of two narratives: one of reflation and
roaring 20s, with fiscal stimulus creating higher levels of
growth; and the other is the lower-for-longer idea where
ultimately inflation proves hard to generate and interest rates
stay at low levels," Kiran Ganesh, head of multi asset at UBS
Global Wealth Management in London.
"These two narratives are conflicting and are in investors'
minds at the same time."
Japan's Nikkei .N225 reversed early gains to shed 1.9%,
while Taiwan's benchmark index .TWII plunged 6% from all-time
highs to levels seen in February on fears it may raise its
COVID-19 alert level in coming days, which would lead to closure
of shops dealing in non-essential items as infections rise.
E-mini futures for the S&P 500 ESc1 stumbled 0.2% while
futures for the tech-heavy Nasdaq NQc1 were down 0.5%.
Analysts, however, doubted the broader equities sell-off
would extend much further in a world of easy accommodative
policy and fiscal largesse.
"Despite the severity of the moves, we sensed limited panic
in our client conversations with many using (the) weakness as an
opportunity to buy the dip, particularly in the value orientated
areas e.g. banks, energy and insurance," JPMorgan analysts wrote
in a note.
The equity rout barely helped drive any safe haven flows
into the greenback even as futures pointed to another negative
open for Wall Street.
"What is unusual about the last two days is that the
equity-market angst did not provide the U.S. dollar with a
notable lift," said Alvin T. Tan, head of Asia FX strategy at
RBC Capital Markets.
The dollar hovered near a 2-1/2-month low versus major
peers, as traders clung on to bets that the Federal Reserve
would remain steadfast in its easy policy settings ahead of the
release of the U.S. consumer price index data expected to show a
sharp rise in annual U.S. inflation.
The U.S. Federal Reserve expects higher inflation though
officials have pointed to transient factors and base effects for
the temporary rise.
The dollar index =USD , which measures the greenback
against six major currencies, was broadly flat at 90.211. USD/
The currencies of major natural resource suppliers such as
Canada have been buoyant amid rising commodity prices.
The loonie CAD=D3 was not far from a 3-1/2-year high of
C$1.2078.
The Australian dollar AUD=D3 , another proxy for commodity
prices, pulled away from a 10-week high struck on Monday to
reach $0.7811.
Oil prices were higher, with U.S. crude CLc1 adding 1% to
$65.94 a barrel. Brent crude LCOc1 added 0.9% to $69.20 per
barrel. O/R
Copper prices rose and were not far from a record high hit
earlier this week, with three-month copper on the London Metal
Exchange CMCU3 adding 1.1% to $10,579 a tonne. gold was 0.2% lower at $1,832 an ounce. XAU=
In cryptocurrencies, ether ETH=BTSP hit a fresh record
high touched on Monday and was last at $4,315.41. The value of
the second-biggest digital token has surged over 5.5 times so
far this year.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
US inflation https://tmsnrt.rs/3tF1WzY
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>