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REFILE-GLOBAL MARKETS-Rising U.S. yields takes edge off stocks rally

Published 17/02/2021, 03:38
© Reuters.
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(Corrects typo in headline)
* Ten-year Treasury yields hit 1.3330%; yen hits 5-month low
* MSCI AxJ index eases from record high
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Global asset performance http://tmsnrt.rs/2yaDPgn

By Tom Westbrook and Pete Schroeder
SINGAPORE/WASHINGTON, Feb 17 (Reuters) - U.S. Treasury
yields hit one-year highs on Wednesday, lending support to the
dollar but pressuring lofty valuations for stocks, as investors
reckoned that a stimulus-fuelled global recovery will eventually
bring rising inflation.
Benchmark ten-year U.S. Treasury yields US10YT=RR rose as
far as 1.3330% in Asia, the highest since February 2020,
although they later eased back to 1.2989%. US/
The gap over two-year yields also opened to its widest in
nearly three years, as traders figure that short-term monetary
policy will stay accommodative, even as the world bounces back
from the pandemic.
The prospect of better risk-free returns weighed on equities
and MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was stalled just shy of Tuesday's record peak.
Japan's Nikkei .N225 fell 0.7% and S&P 500 futures ESc1
slipped 0.3% after the index posted a small fall overnight.
"You're basically taking away a deflation worry," said Rob
Carnell, chief economist in Asia at ING.
"It's a general sense that things are moving back to normal,
and probably the single biggest driver of that is the fall in
COVID numbers in U.S., it's the re-opening that really delivers
you the growth," he said.
New COVID-19 cases in the United States fell for a fifth
consecutive week last week.
The bonds selloff, which was jump-started in January when
Democrats won control of the U.S. Senate, has now added almost
40 basis points to U.S. 10-year yields this year as investors
price in heavy government borrowing for stimulus spending.
Overnight on Wall Street, the Dow Jones .DJI was helped to
a record closing high by gains from banks, which benefit from
higher yields, while the S&P 500 .SPX fell 0.06% and the
Nasdaq .IXIC dropped 0.3%. .N
Besides a cooling in stock-market exuberance, gold and the
Japanese yen JPY= , have been other casualties of the rise in
U.S. yields. Gold, which pays no income, tends to fall when
yields rise and it touched a two-week low on Wednesday. GOL/
The yen is sensitive to U.S. rates because Japanese yields
are anchored and higher U.S. returns can attract investment
flows out of yen and into dollars. The yen hit a five-month low
against the dollar on Wednesday and has lost 2.7% this year.

CHILL
A Texas cold snap that has shut down about a fifth of U.S.
oil production has also stoked inflation expectations by
boosting oil prices to 13-month highs. O/R
Front-month gas futures NGc1 also jumped as much as 10% to
a more than three-month high, though a stronger U.S. dollar has
since pared some of the rise.
U.S. crude futures CLc1 slipped 0.6% to $59.71 a barrel on
Wednesday after poking above $60 on Tuesday, while Brent crude
futures LCOc1 were also down 0.6% at $62.95.
In currency markets, the dollar's strength was applying
broad pressure. The euro EUR=EBS dipped below its 20-day
moving average to $1.2083.
The Australian and New Zealand dollars each slipped a
fraction and the British pound, which has been surging as
vaccinations roll out rapidly across the United Kingdom, was
forced back below $1.39 and last sat at $1.3874. FRX/
Ahead on Wednesday investors will be eyeing inflation data
releases in Britain and Canada for any signs of a jump. U.S.
retail sales data is also due, as are newly published minutes
from the Federal Reserve's January policy meeting.
"Tonight's release of the ... minutes is likely to reinforce
the notion that the Fed is committed to keeping rates low for a
longer period of time," Sophia Ng, an analyst at MUFG Bank at
Singapore, said in a note to clients.
Earnings reports this week from Hilton Worldwide Holdings
Inc HLT.N , Hyatt Hotels Corp H.N and Marriott International
Inc MAR.O will also be scrutinized for signs of a pickup in
global travel demand.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Global assets http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets http://tmsnrt.rs/2ihRugV
MSCI All Country World Index Market Cap http://tmsnrt.rs/2EmTD6j
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