World shares slide on inflation fears, commodities surge

By Herbert Lash NEW YORK (Reuters) - Global stock markets fell on Monday as expectations for faster growth and inflation battered bonds and boosted commodities, while rising fixed-income yields made equity valuations look more stretched in comparison. The dollar slid against major currencies, slumping to multi-year lows against the British pound and the Australian dollar.

Reuters February 23, 2021 00:07:01 IST
World shares slide on inflation fears, commodities surge

World shares slide on inflation fears commodities surge

By Herbert Lash

NEW YORK (Reuters) - Global stock markets fell on Monday as expectations for faster growth and inflation battered bonds and boosted commodities, while rising fixed-income yields made equity valuations look more stretched in comparison.

The dollar slid against major currencies, slumping to multi-year lows against the British pound and the Australian dollar. Gold rose more than 1% to a near one-week high and copper prices shot above $9,000 a tonne for the first time since 2011.

Oil prices rose on a tight global supply outlook with U.S. production hammered by frigid weather and an approaching meeting of top crude producers expected to keep output largely reined in.

Investors, who have been buying economically sensitive cyclical stocks and selling growth stocks, are preparing for a potential spike in inflation with the U.S. Congress poised to pass a $1.9 trillion stimulus bill.

"If interest rates are expected to rise, then that would reduce the intrinsic value of growth stocks," said Sam Stovall, chief investment strategist at CFRA Research.

High-growth stocks, including Apple Inc, Microsoft Corp, Tesla Inc and Amazon.com, pulled the Nasdaq down and weighed on the S&P 500.

MSCI's all-country world index, which tracks shares across 49 countries, fell 0.63%.

In Europe, the broad STOXX 600 index was down 0.36%, hitting its lowest in 10 days. Germany's DAX fell 0.31%, France's CAC 40 slid 0.11% and Britain's FTSE 100 lost 0.18%.

On Wall Street, the Dow Jones Industrial Average rose 0.07%, the S&P 500 lost 0.50% and the Nasdaq Composite dropped 1.56%.

Government bond yields across the euro area fell after European Central Bank chief Christine Lagarde said the ECB was "closely monitoring" rising borrowing costs.

Bond yields have risen sharply this month as prospects for more U.S. fiscal stimulus have boosted hopes for a faster economic recovery globally, which would also lift inflation.

U.S. economic growth as measured by gross domestic product is expected to run hotter than at any time in the past 35 years and business investment is expected to run twice as fast as the broad economy, according to Credit Suisse.

Federal Reserve Chair Jerome Powell delivers his semi-annual testimony before Congress this week and is likely to reiterate a commitment to keeping policy super easy for as long as needed to drive inflation higher.

"The fact that the most recent rise in long bond yields has been driven by higher real interest rates and not just inflation expectations increases the probability of a dovish message," said Elisabet Kopelman, U.S. economist at SEB.

The 10-year U.S. Treasury note's yield fell 0.2 basis point to 1.3432%. The yield on the benchmark U.S. Treasury note earlier jumped to 1.394%, the highest since February 2020.

Earlier in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.18%, after slipping from a record top last week as the jump in U.S. bond yields unsettled investors.

Japan's Nikkei recouped 0.8% but Chinese blue chips lost 1.4%.

Oil prices jumped, with international benchmark Brent gaining 22% for the year to date.

Brent crude futures rose $1.69 to $64.6 a barrel. U.S. crude futures gained $1.83 to $61.07 a barrel.

Rising oil and metals prices have been a boon for commodity-linked currencies, with the Canadian, Australian and New Zealand dollars all higher for the year.

Sterling hit a three-year top of $1.4068, aided by one of the fastest vaccine rollouts in the world.

The dollar index fell 0.226%, with the euro up 0.27% to $1.215. The Japanese yen strengthened 0.35% versus the greenback at 105.03 per dollar.

Spot gold prices rose 1.64% to $1,811.50 an ounce.

Bitcoin fell 7.2% at $53,344.07 from a record high of $58,354.

(Reporting by Herbert Lash; Editing by Dan Grebler)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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