GLOBAL MARKETS-Bond scares spook world shares, investors look to Powell

* Bond worries resurface ahead of Powell's comments later in
day
* Uncertainty on liquidity regulation on U.S. banks weigh on
bonds
* Asian shares fall 1.8%, Nasdaq futures hit 2-month low
* Dollar hits 7-month high against yen, 4-month high vs
Swissie
* European shares seen falling 0.5-0.8%

By Hideyuki Sano
TOKYO, March 4 (Reuters) - Resurgent worries about rising
U.S. bond yields hit global shares on Thursday as investors
waited to see if Federal Reserve Chair Jerome Powell will
address concerns about the risk of a rapid rise in long-term
borrowing costs.
The spectre of higher U.S. bond yields also undermined
low-yielding, safe-haven assets, such as the yen, the Swiss
franc and gold.
Benchmark 10-year U.S. Treasuries rose to 1.477%
US10YT=RR , heading back towards a one-year high of 1.614% set
last week on bets on a strong economic recovery aided by
government stimulus and progress in vaccination programmes.
"It is not clear how the Fed wants to deal with bond
yields," said Hirokazu Kabeya, chief global strategist at Daiwa
Securities.
"The pace of rises in yields has been far faster than most
people have expected and there's speculation the authorities may
be starting to think about tightening their policy."
Euro Stoxx 50 futures STXEc1 fell 0.9% while Britain's
FTSE futures FFIc1 edged down 0.5% lower.
The MSCI's ex-Japan Asian-Pacific shares .MIAPJ0000PUS
lost 1.8% in early trade while Japan's Nikkei .N225 fell 2.2%.
E-mini S&P futures EScv1 slipped 0.4% while the futures
for the Nasdaq, the unequivocal leader of the post-pandemic
rally, fell 0.7% NQcv1 , hitting a two-month low.
Tech shares are vulnerable because their lofty valuation has
been supported by expectations of a prolonged period of low
interest rates.
But the market is laser-focused on Powell, who is due to
speak at a Wall Street Journal conference at 12:05 p.m. EST
(1705 GMT), in what will be his last outing before the Fed's
policy-making committee convenes March 16-17. Many Fed officials have downplayed the rise in Treasury
yields in recent days, although Fed Governor Lael Brainard on
Tuesday acknowledged concerns over the possibility a rapid rise
in yields could dampen economic activity.
In addition, anxiety is building over a pending regulatory
change in a rule called the supplementary leverage ratio, or
SLR, which could make it more costly for banks to hold bonds.
"The market is likely to be unstable until this regulation
issue will be sorted out," said Masahiko Loo, portfolio manager
at AllianceBernstein. "There aren't people who want to catch a
falling knife when market volatility is so high."
In addition, the market will also have to grapple with a
huge increase in debt sales after rounds of stimulus to deal
with a recession triggered by the pandemic.
The issue is not limited to the United States, with the
10-year UK Gilts yield jumping back to 0.779% GB10YT=RR , near
its 11-month high of 0.836% hit last week, after the government
unveiled much higher borrowing. Currency investors continued to snap up dollars as they bet
on the U.S. economy outshining peers in the developed world in
coming months. FRX/
The dollar rose to a seven-month high of 107.16 yen JPY= .
"U.S. dollar/yen has been on a one-way trajectory since the
start of 2021," said Joseph Capurso, head of international
economics at the Commonwealth Bank of Australia.
"The brightening outlook for the world economy is a positive
for both U.S. dollar/yen and Australian dollar/yen."
Other safe-haven currencies were soft, with the Swiss franc
flirting with a four-month low against the dollar CHF= and a
20-month trough versus the euro EURCHF= .
Gold hit a nine-month low of $1,702.8 per ounce XAU=
on Wednesday and last stood at $1,719.
Other major currencies were little moved, with the euro flat
at $1.2054 EUR= .
Investor focus on a U.S. economic rebound was unshaken by
data released overnight that showed the U.S. labour market
struggling in February, when private payrolls rose less than
expected. Oil prices rose for a second straight session early on
Thursday, as the possibility that OPEC+ producers might decide
against increasing output at a key meeting later in the day
underpinned alongside a drop in U.S. fuel inventories. O/R
U.S. crude CLc1 rose 0.6% to $61.64 per barrel.

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Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
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MSCI All Country World Index Market Cap http://tmsnrt.rs/2EmTD6j
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