(Reuters) – London’s FTSE 100 fell on Monday as higher commodity prices sparked fears of a spike in inflation, while investors awaited Prime Minister Boris Johnson’s plan for a phased easing of business restrictions.
The blue-chip FTSE 100 fell 0.6%, led by declines in consumer staples and industrials stocks.
Oil heavyweights BP and Royal Dutch Shell dipped 0.1% and 0.3%, respectively, despite higher crude prices. [O/R]
Johnson will plot a path out of COVID-19 lockdown on Monday in an effort to gradually reopen the battered $3 trillion economy, aided by one of the fastest vaccine rollouts in the world.
The mid-cap index fell 0.3%, led by declines in financials and industrials stocks.
British Airways-owner IAG rose 1.1% after it said it raised total liquidity by 2.45 billion pounds ($3.4 billion), reaching final agreement for a 2-billion-pound loan, and through a deal to defer 450 million pounds of pension deficit contributions.
Pub operator Mitchells & Butlers shed 0.5% as it reported a plunge in sales due to all its sites having been forced shut under the latest lockdown.
(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V)
Shares turn cautious as bond yields, commodities surge
By Wayne Cole
SYDNEY (Reuters) – Asian shares turned mixed on Monday as expectations for faster economic growth and inflation globally battered bonds and boosted commodities, while rising real yields made equity valuations look more stretched in comparison.
MSCI’s broadest index of Asia-Pacific shares outside Japan went flat, after slipping from a record top last week as the jump in U.S. bond yields unsettled investors.
Japan’s Nikkei recouped 0.8% and South Korea 0.1%, but Chinese blue chips lost 1.4%.
S&P 500 futures dipped 0.1% and EUROSTOXX 50 futures 0.3%, while FTSE futures fell 0.7%.
Bonds have been bruised by the prospect of a stronger economic recovery and yet greater borrowing as President Joe Biden’s $1.9 trillion stimulus package progresses.
“Yield curves have continued to steepen, as COVID infection rates decline further, reopening plans are discussed and a large U.S. fiscal stimulus package looks likely,” said Christian Keller, Barclays’ head of economics research.
“This in principle signals a better medium-term growth outlook for the U.S. and beyond, as other core yields curves are moving in the same direction,” he added. “Meanwhile, central banks seem set to look through this year’s inflation increase, keeping the curves’ front end anchored.”
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.
European Central Bank President Christine Lagarde is also expected to sound dovish in a speech later Monday.
Yields on 10-year Treasury notes have already reached 1.38%, breaking the psychological 1.30% level and bringing the rise for the year so far to a steep 43 basis points.
Analysts at BofA noted 30-year bonds had returned -9.4% in the year to date, the worst start since 2013.
“Real assets are outperforming financial assets big in ’21 as cyclical, political, secular trends say higher inflation,” the analysts said in a note. “Surging commodities, energy laggards in vogue, materials in secular breakouts.”
A COPPER-PLATED RECOVERY
One of the stars has been copper, a key component of renewable technology, which shot up 7.7% last week to a nine-year peak. Even the broader LMEX base metal index climbed 5.5% on the week.
Oil prices have gone along for the ride, aided by tightening supplies and freezing weather, giving Brent gains of 22% for the year so far. [O/R]
On Monday, Brent crude futures were up another 66 cents at $63.57 a barrel, while U.S. crude added 51 cents to $59.75.
All of which has been a boon for commodity-linked currencies, with the Canadian, Australian and New Zealand dollars all sharply higher for the year so far.
Sterling reached a three-year top at $1.4050, aided by one of the fastest vaccine rollouts in the world. British Prime Minister Boris Johnson is due to outline a path from COVID-19 lockdowns on Monday.
The U.S. dollar index has been relatively range-bound, with downward pressure from the country’s expanding twin deficits balanced by higher bond yields. The index was last at 90.342, not far from where it started the year at 90.260.
Rising Treasury yields has helped the dollar gain somewhat on the yen to 105.60, given the Bank of Japan is actively restraining yields at home.
The euro was steady at $1.2120, corralled between support at $1.2021 and resistance around $1.2169.
One commodity not doing so well is gold, partly due to rising bond yields and partly as investors question if crypto currencies might be a better hedge against inflation. [GOL/]
The precious metal stood at $1,783 an ounce, having started the year at $1,896. Bitcoin was off 2.2% on Monday at $56,209, but started the year at $19,700.
(Editing by Shri Navaratnam and Jacqueline Wong)
FTSE Russell to include 11 stocks from China’s STAR Market in global benchmarks
SHANGHAI (Reuters) – Index provider FTSE Russell will add 11 stocks from China’s STAR Market to its global benchmarks, according to a post on its website from Friday.
The move marks the first time shares from Shanghai’s Nasdaq-style STAR Market for stocks in China have been included in a global index.
The 11 stocks include Raytron Technology Co Ltd, Zhejiang HangKe Technology Co Ltd, Montage Technology Co Ltd, Advanced Micro-Fabrication Equipment Inc China.
(Reporting by Josh Horwitz and Samuel Shen in Shanghai; Editing by William Mallard)
UK insurers estimate to pay up to 2.5 billion pounds for coronavirus claims
(Reuters) – The Association of British Insurers (ABI) said on Saturday insurers are likely to pay up to 2.5 billion pounds ($3.50 billion) for UK’s COVID-19 insurance claims incurred in 2020.
The latest estimates include 2 billion pounds for COVID-19 business interruption claims and 500 million pounds for COVID-19 related protection insurance claims, travel insurance claims and other general insurance products.
ABI’s Director General Huw Evans said in a release that the pandemic illustrated some uncomfortable gaps between what people expected to be covered for and what their policy was designed for.
“We need to learn lessons from this unprecedented event and redouble our efforts to improve consumers’ trust in insurance products,” he added.
The insurance trade body said 123,000 claims have been settled with payment so far and a further 9,000 have received partial payments as of mid-January 2021.
($1 = 0.7139 pounds)
(Reporting by Maria Ponnezhath in Bengaluru; Editing by Marguerita Choy)
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