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GLOBAL MARKETS-Stocks try to recover from bond whiplash, dollar gains

Published 02/27/2021, 01:41 AM
Updated 02/27/2021, 01:50 AM
© Reuters.
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* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
* Dollar lifted by rise in yields
* Bitcoin set for worst week since March

By Herbert Lash
NEW YORK, Feb 26 (Reuters) - Global equity markets swooned
on Friday, even as the Nasdaq and S&P 500 tried to recover and
the bond rout eased a bit, but fears of rising inflation still
weighed on sentiment as data showed a strong rebound in U.S.
consumer spending.
Shares of Amazon.com Inc AMZN.O , Microsoft Corp MSFT.O
and Alphabet Inc GOOGL.O edged up after bearing the brunt of
this week's downdraft, while financial and energy shares fell.
The S&P 500 .SPX gained 0.80% and the Nasdaq Composite
.IXIC added 1.87%. But the Dow Jones Industrial Average .DJI
fell 0.3%.
U.S. consumer spending rose by the most in seven months in
January as low-income households got more pandemic relief money
and new COVID-19 infections dropped, setting the U.S. economy up
for faster growth ahead. The benchmark 10-year Treasury US10YT=RR note on Thursday
touched 1.614%, the highest in a year, rocking world markets.
The note's yield is up more than 50 basis points year to date
and is now close to the dividend return of S&P 500 stocks.
The 10-year US10YT=RR note fell 1.7 basis points to
1.4977%.
The amount of money swirling through markets and U.S. stocks
at close to all-time highs has caused investor angst, said JJ
Kinahan, chief market strategist at TD Ameritrade in Chicago.
"Many people are taking some profits and not necessarily
reinvesting that money quite yet," Kinahan said, but the tug of
war isn't over year.
"The U.S. equity market is still the best game in terms of
safety versus opportunity. But there is a shift going on."
The scale of the recent Treasury sell-off prompted
Australia's central bank to launch a surprise bond buying
operation to try to staunch the bleeding. MSCI's benchmark for global equity markets .MIWD00000PUS
slid 0.83% to 661.49.
In Europe, the broad FTSEurofirst 300 index .FTEU3 closed
down 1.64% at 1,559.48. Technology stocks .SX8P lost the most
as they continued to retreat from 20-year highs.
The dollar rose against most major currencies as U.S.
government bond yields held near one-year highs and riskier
currencies such as the Aussie dollar weakened.
The dollar index =USD rose 0.578%, with the euro EUR=
down 0.78% to $1.2081. The Japanese yen JPY= weakened 0.42%
versus the greenback at 106.66 per dollar.
Gold fell more than 2% to an eight-month low, the stronger
dollar and rising Treasury yields hammered bullion and put it on
track for its worst month since November 2016.
Benchmark German government bond yields fell for the first
time in three sessions but were still headed for their biggest
monthly jump in three years after rising inflation expectations
triggered a sell-off.
The 10-year German bund DE10YT=RR note fell less than 1
basis points to -0.263%.
European Central Bank executive board member Isabel Schnabel
reiterated on Friday that changes in nominal interest rates had
to be monitored closely. Copper recoiled after touching successive multi-year peaks
in six consecutive sessions, falling more than 3% as risk-off
sentiment hit wider financial markets after a spike in bond
yields.
Three-month copper on the London Metal Exchange (LME)
CMCU3 slumped to $9,112 a tonne.
MSCI's Emerging Markets equity index .MSCIEF suffered its
biggest daily drop since the markets swooned in March. MSCI's
emerging markets index .MSCIEF fell 3.06%.
The surge in Treasury yields caused ructions in emerging
markets, which feared the better returns on offer in the United
States might attract funds away.
Currencies favoured for leveraged carry trades all suffered,
including the Brazil real and Turkish lira TRYTOM=D3 , which
slid for a fifth straight day, erasing all the year's gains.
Asia earlier saw the heaviest selling, with MSCI's broadest
index of Asia-Pacific shares outside Japan .MIAPJ0000PUS
sliding more than 3% to a one-month low, its steepest one-day
percentage loss since the market rout in late March.
Oil fell. Brent crude futures LCOc1 fell $0.78 to $66.1 a
barrel. U.S. crude futures CLc1 slid $1.24 to $62.29 a barrel.


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