GLOBAL MARKETS-Shares grind higher despite rising bond yields, weak data

(Updates throughout.)
* Pan-European stock index up 0.2%
* Sterling at $1.40 for first time in nearly three years
* German, British 10-yr bond yields up to multi-month highs
* Gold hits a seven-month low, oil prices slip

By Tom Arnold
LONDON, Feb 19 (Reuters) - Global shares edged up on Friday,
reversing three days of losses, as investors clung to hopes of
economic recovery ahead, while German and British 10-year bond
yields touched multi-month highs, spurred by bets of reflation
in the United States.
The pan European index .STOXX was up 0.2% but still set
for its first weekly loss in February, as investors took solace
in factory activity in February jumping to its highest in three
years even as the data also showed continued pain for the bloc's
dominant service industry from measures to contain the
coronavirus. London's FTSE index FTSE was 0.1% firmer. Data showed
British retail sales tumbled in January. Hermes shares HRMS.PA jumped 5.7% as the Birkin bag maker
said sales recovered sharply in the fourth quarter. The MSCI world equity benchmark .MIWD00000PUS was 0.2%
stronger. MSCI's broadest index of Asia Pacific shares outside
of Japan .MIAPJ0000PUS was flat.
E-mini futures for the S&P 500 ESc1 were 0.3% firmer.
Global shares have been fuelled in recent months largely by
easy monetary and fiscal policies around the world and initial
rollouts of COVID-19 vaccines.
"It's kind of odd to think that only a year ago investors
were worried about depression and deflation and now they are
worried about overheating and inflation," said Shane Oliver, an
economist for AMP.
"The big-picture backdrop of still-low underlying inflation
and spare capacity in jobs markets, combined with economic and
profit recovery and low interest rates, is a positive one for
growth assets, particularly shares," he said.
Core bond yields have pushed higher globally, led by the
so-called reflation trade, where investors wager on a pick-up in
growth and inflation. Growing momentum for coronavirus vaccine
programmes and hopes of massive fiscal spending under U.S.
President Joe Biden have spurred reflation trades.
Minutes of the European Central Bank's January meeting,
released on Thursday, showed policymakers expressed fresh
concerns over the euro's strength but appeared relaxed over the
recent rise in government bond yields. German benchmark 10-year bond yields DE10YT=RR were set
for their worst week since June. They were up on Friday to
-0.32%, hitting their highest since June. British 10-year yields
GB10YT=RR traded close to a 11-month top of 0.66% and U.S.
Treasury yields US10YT=RR were not far from one-year highs
around 1.3%.
Rising bond yields hurt the appeal of gold XAU= , with spot
prices dropping to a seven-month low to trade at $1,772.80 per
ounce. GOL/
"The reflation-narrative-driven selloff in bond yields
really has now developed a life of its own," said James Athey,
investment director at Aberdeen Standard Investments. "It is
starting to move real yields higher, which is increasingly
suggestive of a market which is testing central bank resolve."
Disappointing U.S. jobless figures didn't help investor
sentiment.
An unexpected increase in the number of Americans seeking
jobless benefits weighed on the outlook. The Labor Department on
Thursday reported initial unemployment claims rose by 13,000 to
861,000, injecting scepticism about how quickly the U.S. economy
could rebound from the global pandemic.
Further, U.S. housing starts fell 6.0% in January, the first
decline in five months.
In currencies, the poor U.S. data helped the dollar slip
further and the euro rebound. The dollar slipped 0.3% against a
basket of currencies, putting the dollar index at 90.309 =USD .
The British pound GBP= has been the standout performer in
2021, and on Friday it rose to $1.4009, a near three-year high
amid Britain's aggressive vaccination programme.
Helped by a recent rally in commodity prices, the Aussie
dollar rose 0.8% to $0.784 AUD=D3 , its highest since March
2018.
Bitcoin BTC=BTSP , which some see as a hedge against
inflation, hit a record high of $52,932, gaining more than 2.6%
on the day.
In commodities, oil markets saw some profit-taking following
days of gains driven by a deep freeze across Texas that weighed
on production. O/R
Brent crude LCOc1 fell 1.6% to at $62.94 a barrel. U.S.
crude CLc1 futures slipped 2.1% to $59.27 a barrel.

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