GLOBAL MARKETS-European equities rise; U.S. yields ease after pushback on taper talk

* Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates http://tmsnrt.rs/2egbfVh
* Reuters Live Markets blog: LIVE/

LONDON, Jan 13 (Reuters) - European shares rose after a
shaky start and the dollar edged up on Wednesday, while the
10-year U.S. Treasury yield fell from 10-month highs, helped by
policymakers pushing back against talk of the Fed tapering its
support.
After Asian equities saw modest gains, European shares
opened lower then rose slightly, with the pan-European STOXX 600
up 0.2% on the day at 0918 GMT .STOXX .
MSCI world equity index .MIWD00000PUS , which tracks shares
in 49 countries, was up 0.2%, edging back towards all-time
highs, and MSCI's main European Index .MSER was up by a
similar amount.
China recorded its biggest daily jump in COVID-19 cases in
more than five months, despite four cities being in lockdown,
and the Dutch government said it would extend lockdown measures
on Tuesday. Investors are closely tracking the discussion around
tapering - that is, the Fed's possible easing of monetary
stimulus.
Several Federal Reserve policymakers, including Loretta
Mester, Esther George, James Bullard and Eric Rosengren pushed
back on the idea of the Fed tapering its asset purchases any
time soon. These comments, along with a well-received auction of
10-year Treasuries, pushed the U.S. 10-year yield back down,
away from the 10-month high of 1.187% reached in the previous
session.
At 0919 GMT, the benchmark yield was at 1.1189% US10YT=RR .
The yield curve US2US10=TWEB , which had reached the
steepest since May 2017 on expectations for big fiscal stimulus
under a new Democratic administration, narrowed slightly to 96.8
basis points.
"We believe the potential for fiscal stimulus, along with a
normalization of economic activity as the vaccine rollout ramps
up, justify slightly higher US Treasury yields," UBS strategists
wrote in a note to clients.
"To acknowledge this, we have raised our 10- and 30- year US
Treasury yield forecasts by 0.1 percentage points this year to
1.0% and 1.7%, respectively, by end-December," they said, adding
that they do not expect the run-up in yields to go much further
than that because central banks remain accommodative and the Fed
has signalled a tolerance for higher inflation.
In light of the recent yield jump, U.S. December inflation
data due at 1330 GMT will be closely watched.
The U.S. dollar recently broke its downward trend with a
three-day winning streak, then resumed falling on Tuesday. It
was steady overnight but picked up in early London trading on
Wednesday, calling into question whether its bounce was over.
At 0920 GMT, it was up 0.1% at 90.136 versus a basket of
currencies =USD .
With at least five Republicans joining the Democrats push to
impeach President Donald Trump over the storming of the U.S.
Capitol, Marshall Gittler, head of investment research at
BDSwiss Group, said that preventing Trump from running for
office in future would "permanently remove the “Trump premium”
from the dollar and allow the currency to weaken further."
In Europe, government bond yields dipped. Italian bonds,
which sold off on Tuesday due to political uncertainty, lagged
behind Germany. Euro zone industrial production data for November is due at
1000 GMT.
Versus the dollar the euro was down around 0.2% at $1.21875
at 0920 GMT EUR=EBS . Riskier currencies such as the Australian
and New Zealand dollars also fell as the U.S. dollar edged
higher NZD=D3 AUD=D3 .
Bitcoin edged up slightly but, at $34,999 was still around
17% down from the all-time high of $42,000 it reached on Friday
last week BTC=BTSP .
Oil prices rallied, gaining for the seventh straight day,
with U.S. West Texas Intermediate and Brent crude both trading
at their highest since February, after industry data showed a
bigger than expected drop in inventories and investors shrugged
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Global asset performance http://tmsnrt.rs/2yaDPgn
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