GLOBAL MARKETS-Shares struggle against rising bond yields, weak data

(Updates throughout.)
* Pan-European stock index up 0.1%
* 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 and Swati Pandey
LONDON/SYDNEY, Feb 19 (Reuters) - Global shares struggled to
avoid a fourth straight day of losses on Friday as data showed
euro zone business activity slowing in February, while German
and British 10-year bond yields touched multi-month highs,
driven up by bets on rising inflation.
The pan European index .STOXX was up 0.1% but still set
for its first weekly loss in February, as IHS Markit's flash
composite PMI nudged closer to the 50 mark separating growth
from contraction. London's FTSE index FTSE was 0.1% weaker as 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 up 0.1%.
MSCI's broadest index of Asia Pacific shares outside of Japan
.MIAPJ0000PUS was last down 0.1% at 733.9 from a record high
of 745.89 touched on Thursday.
E-mini futures for the S&P 500 ESc1 were broadly flat.
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.
German benchmark 10-year bond yields DE10YT=RR were set
for their worst week since mid-June. They were up in early trade
on Friday. British 10-year yields GB10YT=RR traded at a
11-month top of 0.66% and U.S. Treasury yields US10YT=RR are
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 before recouping some
losses to trade at $1,773 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 0.1% against a
basket of currencies, putting the dollar index at 90.474 =USD .
The British pound GBP= has been the standout performer in
2021, and on Friday it rose to $1.40, a near three-year high
amid Britain's aggressive vaccination programme.
Bitcoin BTC=BTSP , which some see as a hedge against
inflation, hit a record high of $52,757, gaining more than 2% 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 1.5% to at $62.99 a barrel. U.S.
crude CLc1 futures slipped 1.9% to $59.39 a barrel.

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