* Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates http://tmsnrt.rs/2egbfVh
By Ritvik Carvalho
LONDON, April 12 (Reuters) - Global stock markets fell from
record highs on Monday as investors waited to see whether U.S.
earnings would justify sky-high valuations, while a rally in
bonds could be tested by what should be strong readings for U.S.
inflation and retail sales this week.
MSCI's All Country World Index .MIWD00000PUS , which tracks
stocks across 49 countries, was down 0.14% after the start of
European trading, off Friday's record high. The gauge's
price-to-earnings ratio is at its highest level since early
2010.
Stocks hit record highs across the world last week on
optimism that vaccination programmes and the easing of lockdowns
to combat COVID-19 would bode well for an economic rebound.
Total market capitalization of global equities hit $90 trillion
dollars last week, according to Refinitiv data.
Morgan Stanley noted that despite the S&P 500 .SPX making
all-time highs, small-cap stocks represented by the Russell 2000
small-cap index .RUT have underperformed the S&P 500 by 8%
since peaking on March 12.
"In my view, the breakdown of small caps and cyclicals is a
potential early warning sign that the actual re-opening of the
economy will be more difficult than dreaming about it," said
Michael Wilson, the bank's chief U.S. equity strategist and
chief investment officer.
"Small caps and cyclicals have been stellar outperformers
over the past year. In essence, they were discounting the
recovery and re-opening that we are about to experience.
However, now we must actually do it and with that comes
execution risk and potential surprises that aren't priced."
Nasdaq futures NQc1 were down 0.2% on Monday. S&P 500
futures edged 0.1% lower ESc1 .
European shares eased off record highs as investors held off
from making big bets before earnings season. The pan-European
STOXX 600 index .STOXX was down 0.2% by 1140 GMT. .EU
Britain's domestically focused FTSE mid 250 index .FTMC
held 0.2% below a record high as shops, pubs, gyms and
hairdressers re-opened after three months of lockdown.
The UK's more export-oriented FTSE 100 .FTSE fell 0.3%,
Germany's DAX .GDAXI and France's CAC 40 .FCHI traded 0.1%
and 0.2% higher respectively. Italy's FTSE MIB gained nearly
half a percent. .FTSEMIB
The VIX volatility index, also known as Wall Street's "fear
gauge", ticked slightly higher to 17.48, having hit its lowest
level since March 2020 on Friday. .VIX
"Renewed bouts of elevated volatility are likely over the
coming months, in our view," said Mark Haefele, chief investment
officer at UBS Global Wealth Management. "Investors can take
advantage of this backdrop, however. Low volatility at present
reduces the cost of locking in downside protection."
Earlier in Asia, Tokyo's Nikkei .N225 edged down 0.6%.
South Korean stocks .KS11 were near flat.
India's Nifty 50 index .NSEI slid 2.4% as the country
overtook Brazil with the second-highest number of COVID-19 cases
globally. Chinese blue chips .CSI300 lost 1.5% before the release of
a series of economic data from China.
Shares in Alibaba Group Holding Ltd 9988.HK BABA.N
surged 16% after China imposed a record 18 billion-yuan ($2.75
billion) fine on the e-commerce giant.
The share surge reflected relief that a key source of
uncertainty for the company had been removed and that the fine
and steps ordered were not more onerous.
Over a third of the stock is held by U.S. investors, and it
makes up more than 8% of the MSCI EM index. U.S. growth and tech stocks saw something of a revival last
week as U.S. 10-year Treasury yields retreated to 1.66%
US10YT=TWEB , from a 14-month top of 1.776%.
"Low inflation and dovish central banks should limit the
rise in bond yields during the recovery," said Andrew Pease,
global head of investment strategy at Russell Investments.
Over the weekend, Federal Reserve Chair Jerome Powell said
the economy was about to start growing faster, though the
coronavirus remained a threat.
Data out this week are expected to show U.S. inflation
jumped in March. Retail sales are seen surging, perhaps even
with a double-digit gain. The U.S. Treasury is also set to test
demand with offers of $100 billion in debt this week.
U.S. banks open first-quarter earnings season with Goldman
Sachs GS.N , JPMorgan JPM.N and Wells Fargo WFC.N scheduled
to report on Wednesday.
Analysts expect profits for S&P 500 firms to show a 25% jump
from a year earlier, according to Refinitiv IBES data. That
would be the strongest performance for the quarter since 2018.
The pullback in yields was enough to see the dollar come off
the boil last week. It was last trading at 92.066 =USD against
a basket of currencies, down from a peak of 93.439.
It was lower against the yen at 109.34 JPY= . The euro was
holding at $1.1909 EUR= and above its recent trough of
$1.1702.
Gold prices were idling at $1,737 an ounce XAU= , having
failed to sustain a top of $1,758 last week. GOL/
Oil prices edged higher in range-bound trade on Monday on
optimism over a rebound in the U.S. economy as coronavirus
vaccinations accelerate, though rising COVID-19 cases in other
parts of the world kept a lid on prices. O/R
Brent LCOc1 rose 1% to $63.61 a barrel. U.S. crude CLc1
rose 0.9% to $59.86.
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Emerging markets http://tmsnrt.rs/2ihRugV
Global asset performance http://tmsnrt.rs/2yaDPgn
Lofty valuations https://tmsnrt.rs/3d6uJZ4
Global equities hit $90 trillion market cap https://tmsnrt.rs/3mGMaCt
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