* U.S., European stock futures drop 0.3-0.4%
* Retail sales highlights fragile state of U.S. economic
recovery
* U.S. 10-yr bond yield falls back to 0.85%
* Asian shares gain on COVID-19 advantage, China recovery
* Bitcoin soars, briefly touches $18,000
By Hideyuki Sano and Chibuike Oguh
TOKYO/NEW YORK, Nov 18 (Reuters) - Global shares stepped
back on Wednesday as soft U.S. retail sales fuelled worries that
rising coronavirus cases could stifle a still fragile economic
recovery, dampening the euphoria from vaccine trial
breakthroughs.
U.S. S&P500 futures ESc1 shed 0.4%, a day after the S&P500
index lost 0.48%, while Europe's Euro Stoxx 50 futures STXEc1
eased 0.3%.
Japan's Nikkei .N225 fell 1.1%, bruised by news that new
coronavirus cases in Tokyo hit a record high near 500 and
reports that the city may ask businesses to shorten their hours
again. But many Asian markets bucked the trend, with MSCI's
broadest index of Ex-Japan Asia-Pacific shares .MIAPJ0000PUS
rising 0.3%, helped by better handling of the pandemic in much
of the region and a continued pick up in China's economic
recovery.
"Agile players, including hedge funds, are increasing
bullish bets on Asia, probably expecting further momentum in
China's economic recovery," said Masanari Takada, cross asset
strategist at Nomura Securities.
"There is also speculation that Biden administration would
be more friendly to the Chinese economy, though that view may
need a reality check," he added.
THE THIRD WAVE
The retail sales report released by the U.S. Commerce
Department showed spending decelerating as the holiday shopping
season approaches, amid a lack of fresh fiscal relief from
Washington. A skittish mood also swept investors as several U.S. states
began restricting gatherings and mandating face-coverings after
more than 70,000 Americans were hospitalized for treatment of
COVID-19.
The surge in new coronavirus cases comes as investors have
hailed two promising vaccine trial results published earlier
this month.
"We're are coming out of a solid two weeks so the market
being down half a percent isn't that bad with the prospect of
COVID lockdowns," said Jamie Cox, Managing Partner for Harris
Financial Group.
U.S. Federal Reserve Chairman Jerome Powell noted the
current surge in coronavirus cases is a big concern, and the
economy will continue to need both fiscal and monetary policy
support. "The soft U.S. retail data is showing the impact of
dwindling fiscal support. But the inconvenient truth is that
governments no longer have lots of money to spend like they did
earlier this year," said a trader at a major Japanese bank.
"That means investors will expect the Fed to do more and the
U.S. yield curve will flatten."
Bond yields have come down with the 10-year U.S. Treasuries
dropping to 0.847% US10YT=RR , its lowest level since Nov. 9
and off 7 1/2-month high of 0.975% touched last week.
Falling U.S. yields put pressure on the U.S. dollar, against
the yen in particular.
The dollar slipped 0.2% to 104.01 yen JPY= , erasing more
than a half of its gains made on Monday last week following the
news about COVID-19 vaccine development.
The euro moved little at $1.1875 EUR= while the Chinese
yuan hit a 2 1/2-year high of 6.5318 per dollar in the offshore
trade CNH=D4 .
Sterling held firm after UK tabloid the Sun reported that
Britain could reach a post-Brexit trade agreement with the
European Union by early next week. The pound changed hands at $1.3252 GBP=D4 , not far from
two-month peak of $1.3322 hit a week ago.
Bitcoin briefly jumped more than 3% to $18,293 BTC=BTSP ,
edging closer to a record peak near $20,000 marked in December
2017, extending its bull run after PayPal PYPL.O last month
allowed its customers to use the cryptocurrency on its network.
Bitcoin, while highly volatile, is attracting investors
seeking an inflation hedge as they worry money printing by
central banks around the world since the start of pandemic could
end up debasing the value of fiat currencies.
Oil prices eased on a bigger-than-expected build in U.S.
crude stockpiles, though hopes that OPEC and its allies will
postpone a planned January increase to oil output braked losses.
O/R
Brent crude futures LCOc1 slipped 0.1% to $43.73 per
barrel LCOc1 .
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
COVID-19 https://tmsnrt.rs/3lKwe14
COVID-19 Global Tracker COVID-19 Global Tracker https://tmsnrt.rs/2FkV6wq
U.S. retail sales https://tmsnrt.rs/2Uz7jkY
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(Editing by Kim Coghill)