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Commodities rally, stocks steady, yields off highs

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Commodities rally, stocks steady, yields off highs 1

By Danilo Masoni and Anshuman Daga

MILAN/SINGAPORE (Reuters) – Optimism about the economic outlook pushed commodity prices to new highs on Tuesday, helping stocks steady as expectations of a dovish testimony by Federal Reserve Chairman Jerome Powell calmed down bond yields.

The MSCI world equity benchmark was flat near two week lows by 0919 GMT, helped by gains in commodity-heavy equity indexes in Asia and a rally in European travel stocks on the prospect of easing social restrictions.

British Prime Minister Boris Johnson set out a phased plan on Monday to end a COVID-19 lockdown in the world’s sixth largest economy.

World stocks had been weighed down in recent sessions by a rapid surge in global bond yields which fuelled expectations that central banks could eventually turn less accommodative in a bid to tame inflation. Tech stocks were among the hardest hit.

But the sell-off in the bond market eased after European Central Bank chief Christine Lagarde said on Monday the central bank was “closely monitoring” rising borrowing costs.

Investors now expect Fed’s Powell to be equally reassuring when he testifies before Congress at 1500 GMT.

“If there were already any expectations that Powell could try to calm down rates, then (Lagarde’s remarks) have just further cemented them,” said Giuseppe Sersale, strategist and fund manager at Anthilia in Milan.

Tech stocks and rate-sensitive sectors like utilities in Europe however fell, offsetting stronger travel and commodity stocks and pushing down the <STOXX 600> regional benchmark by 0.6%.

In Asia, the rally in commodities lifted Australia’s S&P/ASX 200 0.9%, while tech-laden South Korea’s Kospi lost 0.3%. Japanese markets were shut for a public holiday.

Nasdaq futures were down 0.6% at three-week lows after high-growth stocks such as Apple, Microsoft and Tesla dragged the index down 2.5% on Monday, while S&P 500 futures inched 0.1% lower.

Bond yields have risen sharply this month as prospects of more U.S. fiscal stimulus boosted hopes for a faster economic recovery globally. However, that is also fuelling inflation worries, prompting investors to sell growth stocks that have rallied in recent months.

“Real U.S. interest rates are now in positive territory, which has created some concern around the consequences for equities markets,” Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management said in a report.

U.S. 10-year Treasury yields edged up to 1.374% but remained below the one-year high of 1.394% hit on Monday.

Germany’s 10-year Bund yields also rose to -0.309% but were below the 8-month high of -0.278% hit in the previous session.

Commodity prices strengthened again.

Oil prices jumped by more than $1, underpinned by optimism over COVID-19 vaccine rollouts and lower output as U.S. supplies were slow to return after a deep freeze in Texas shut in crude production last week.

Brent crude was last up 0.9% at $66.18 a barrel after earlier hitting a fresh 13-month high of $66.79, while U.S. crude rose 1.2% to $62.45 a barrel.

“Oil has been caught up in the broader commodities move higher, with a weaker USD proving constructive for the complex,” ING strategists led by Warren Patterson said in a note.

“Meanwhile, there is also a growing view that the oil market is looking increasingly tight over the remainder of the year”.

Copper prices meanwhile hit a 9-1/2-year high as tight supply and solid demand from top consumer China boosted sentiment.

In currency markets, the dollar briefly dropped to its lowest since Jan. 13 ahead of Powell’s testimony, while commodity-linked currencies hovered near multi-year highs.

The dollar index was up 0.1% at 90.143, with the euro flat at $1.2151.

(Reporting by Danilo Masoni in Milan and Anshuman Daga in Singapore; Editing by Ana Nicolaci da Costa)

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Sterling climbs towards $1.41 as PM sets roadmap to easing lockdown

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Sterling climbs towards $1.41 as PM sets roadmap to easing lockdown 2

By Joice Alves

LONDON (Reuters) – Sterling edged higher on Tuesday against both the dollar and the euro after Prime Minister Boris Johnson set out a schedule for easing lockdown, while British finance minister Rishi Sunak added that more job support will be unveiled next week.

The pound strengthened almost 3% in February against the dollar as traders expect that Britain’s speedy vaccine roll out will help its economy rebound from the biggest contraction in 300 years.

Johnson set out a phased plan on Monday to end England’s COVID-19 lockdown, with schools returning on March 8 when only minimal socialising outdoors would be allowed.

The so-called roadmap would then pass through four stages, with the final step, when most restrictions would be lifted, not starting until June 21 at the earliest.

In early London trade, sterling rose to $1.4098 versus the dollar, its highest level since April 2018. It was up 0.3% at $1.4080 at 0904 GMT

Versus the euro, it also edged 0.1% higher at 86.32 pence, its highest level since March 5, 2020.

“Sterling continues to trade firm on the vaccine label and associated easing of lockdown expectations opening the doors to recovery,” said Neil Jones, Head of FX Sales at Mizuho Bank.

“My sense is the stage is set for $1.45”.

Sunak said he would set out more details of job support measures in his budget next week, after official figures showed unemployment had risen to its highest since early 2016.

“The extended roadmap puts increased pressure upon the Chancellor into next week’s budget, employment support will surely have to extend beyond the current April end date,” said Jeremy Stretch, Head of G10 FX Strategy at CIBC Capital Markets.

Stretch said that even if at this point cable looks increasingly overbought, “we can expect a test of $1.4095-$1.4100, and above there $1.4145-$1.4155”.

(Editing by William Maclean)

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Dollar hits six-week low as traders prepare for Powell

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Dollar hits six-week low as traders prepare for Powell 3

By Tommy Wilkes

LONDON (Reuters) – The dollar touched its lowest since Jan. 13 on Tuesday as investors shifted focus to how U.S. Federal Reserve chief Jerome Powell might respond to expectations of resurgent inflation, while commodity-linked currencies hovered near multi-year highs.

The rise in inflation expectations as investors bet on a post-pandemic economic rebound and the so-called “reflation” trade had lifted U.S. government bond yields and – briefly – the dollar until earlier this month.

But analysts expect Powell, who testifies before Congress at 1500 GMT, will provide reassurance that the Fed will tolerate higher inflation without rushing to raise rates. That might calm bond markets and eventually weigh on the dollar, they said.

“Mr. Powell will very likely reiterate that the Fed is a long way from meeting its goals and that it will likely take some time before ‘sufficient progress’ has been made to taper its bond purchase programme,” UniCredit analysts said.

Joe Capurso, Commonwealth Bank of Australia currency analyst in Sydney, said he thought Powell would deliver “a bit of a cold shower and say: ‘Mr Market you’re getting a bit ahead of yourself….the U.S. economy is long, long way from full employment.'”

The dollar index was last at 90.046, flat on the day, having earlier fallen to 89.941, its weakest since Jan. 13.

Positioning data shows investors overwhelmingly betting that a U.S. dollar, which has been dropping since last March, will keep falling as the world recovers from the COVID-19 pandemic.

The euro rose 0.1% to $1.2168. Euro zone government bond yields had also been rising, but on Monday dropped after European Central Bank President Christine Lagarde said the bank was “closely monitoring” rising borrowing costs.

Commodity-linked currencies have been among the best performers in 2021. Surging prices for materials from oil to milk powder have pushed currencies such as the Canadian, Australian and New Zealand dollars to their highest in roughly three years.

On Tuesday, the Aussie traded down slightly at $0.791 having earlier hit a high of $0.7934. The New Zealand dollar was also down while the Canadian dollar was just below its Monday high.

Sterling hit a new nearly three-year high of $1.4098, up 0.3% on the day, as investors stuck with their bets that a rapid vaccine rollout would allow the British economy to reopen over the next few months.

Prime Minister Boris Johnson laid out his step-by-step plan for ending the current British lockdown on Monday.

The Japanese yen, the worst performing major currency of 2021 because rising U.S. Treasury yields can draw investment from Japan, steadied at 105.13 per dollar, down slightly.

Bitcoin, the world’s biggest cryptocurrency, shed 11% to $48,481 after a wild overnight ride where it sank as low as $47,400.

(Additional reporting by Tom Westbrook in Singapore; editing by Barbara Lewis)

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Mining, energy stocks push FTSE 100 higher; HSBC slides

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Mining, energy stocks push FTSE 100 higher; HSBC slides 4

(Reuters) – London’s FTSE 100 advanced on Tuesday, as rising commodity prices lifted mining and energy stocks, while HSBC dropped after the lender abandoned its long-term profitability targets.

The commodity-heavy FTSE 100 was up 0.7 by 0813 GMT, boosted by oil producers BP and Royal Dutch Shell, which tracked gains in crude prices. [O/R]

Shares of miners Anglo American, Rio Tinto and BHP Group were also among the biggest boost to the index.

Travel and leisure stocks jumped 2.4%, gaining for a second straight day as Prime Minister Boris Johnson unveiled a map out of the lockdown for England.

The mid-cap FTSE 250 rose 0.7%, led by industrials and consumer discretionary stocks.

HSBC Holdings PLC fell 1% after unveiling a revised strategy, focused mainly on wealth management in Asia as the COVID-19 crisis pushed the lender’s annual profit sharply lower.

Shares of Holiday Inn-owner InterContinental Hotels rose 3.2%, despite posting an annual loss, triggered by repeated COVID-19 restrictions and lockdowns.

(Reporting by Shivani Kumaresan in Bengaluru, Editing by Sherry Jacob-Phillips)

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