(Updates details in paragraphs 3 and 4, edits headline)
* Global stocks subdued, U.S. futures point lower
* German Finance Minister Scholz hints at big fiscal push
* China factory-gate prices fall sharply in August
* Markets on edge before ECB meeting
* German 30-yr yields: https://tmsnrt.rs/2A8XP5y
By Karin Strohecker
LONDON, Sept 10 (Reuters) - Global bond yields rose on
Tuesday, amid growing caution over the extent to which the
European Central Bank will add stimulus to boost an ailing
economy this week and rising hopes that Berlin could loosen its
purse strings.
Germany's 30-year benchmark bond yield DE30YT=RR briefly
broke into positive territory for the first time in more than a
month, while U.S. Treasury yields US2YT=RR US10YT=RR
US30YT=RR climbed to 18-day highs.
Safe-haven assets have been caught up in the fixed income
sell-off, with gold XAU= slipping to its lowest level since
mid-August and Japan's yen plumbing a five-week low.
But global stocks .MIWD00000PUS failed to make gains, as
weak Chinese producer prices data dampened the mood, and U.S.
shares were seen opening lower.
The bond moves come as markets are gearing up for Thursday's
European Central Bank (ECB) meeting, which is widely expected to
deliver a cut to interest rates and point to further bond-buying
stimulus. However, there is a growing chorus of opinion that ECB
policymakers and other central banks with negative interest
rates and sub-zero long-term sovereign bond yields are nearing
the limits of stimulus policies.
"Bond markets have priced in much of the gloomy outlook and
made assumptions that additional stimulus is going to be
provided by the ECB, so the scope for disappointment is there if
the ECB doesn't provide as much as desired," said Stewart
Robertson, senior economist at Aviva Investors.
Meanwhile Germany's Finance Minister Olaf Scholz said the
country could counter a possible economic crisis by injecting
"many, many billions of euros" into the economy, signalling his
readiness for a big stimulus package if the economy tips into
recession. His comments, at the start of the country's 2020 budget
debate, come after Reuters reported Berlin was looking into
creating a "shadow budget" to boost public investment and
effectively circumvent limits set by its national debt rules.
Europe's largest economy is teetering on the brink of
recession, but strict national spending rules have tied
policymakers hands on fiscal policy.
The U.S. Federal Reserve is also widely expected to cut
interest rates next week as policymakers race to shield the
global economy from risks, which also include Britain's planned
exit from the European Union.
With interest rates plumbing record lows in many countries
and the effectiveness of further bond-buying muted by already
record-low borrowing costs for governments, attention has turned
to increased public spending or tax cuts to fire up growth.
A CHINESE CLOUD
The sell-off in fixed income markets failed to inspire
global stocks, where the mood was subdued amid concerns over the
health of the world economy.
Asian bourses slipped lower after data showed China's
mainland factory-gate prices shrank at their fastest pace in
three years as flagging demand at home and abroad forced some
businesses to slash prices. In Europe, the pan-European stocks benchmark index STOXX 600
.STOXX fell 0.3% in a second day of losses, while France's CAC
.FCHI slipped 0.2%.
"China inflation data was probably the worst combination of
prints the market could have hoped for," said Stephen Innes,
Market Strategist AXI Trader.
"While the enormous slide in China factory gate prices
reminded us of what we already know, U.S. tariffs are sinking
the Chinese economy and at a much quicker pace than anyone could
have imagined."
However, Germany's export-oriented DAX index .GDAXI turned
positive, helped by a Reuters report that Bank of Japan
policymakers are now more open to discussing the possibility of
expanding stimulus at their Sept. 18-19 board meeting due to the
broadening fallout of the U.S.-China trade war. And climbing bond yields helped lift European banking stocks
.SX7P 1.8%, making financials the best performing sector on
the continent.
U.S. stock futures ESc1 YMc1 NQc1 pointed to a lower
open on Wall Street after the S&P 500 .SPX ended flat in New
York on Monday. .N
In currencies, the rise in Treasury yields helped the dollar
touch a five-week high of 107.50 yen JPY=EBS . The euro
EUR=EBS was broadly flat at $1.104 after reaching an overnight
high of $1.1067.
The pound GBP=D3 traded steady near a six-week high of
$1.2385 after a law came into force demanding that Prime
Minister Boris Johnson delay Britain's departure from the
European Union unless he can strike a divorce deal with the
bloc. Oil futures hit their highest level in six weeks after Saudi
Arabia's new energy minister confirmed he would stick with his
country's policy of limiting crude output to support prices.
U.S. crude CLc1 traded at $58.43 a barrel after hitting
the highest since July 31. Brent crude futures LCOc1 climbed
to $63.23 a barrel. O/R
Prince Abdulaziz bin Salman, who became Saudi Arabia's new
energy minister on Sunday, told reporters there would be "no
radical" change in Saudi's oil policy. Saudi Arabia is OPEC's de
facto leader. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
German 30-yr yield https://tmsnrt.rs/2A8XP5y
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