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Miners lead FTSE 100 higher on earnings cheer

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Miners lead FTSE 100 higher on earnings cheer 1

By Shivani Kumaresan

(Reuters) – UK’s FTSE 100 rose on Wednesday as miners gained after a strong production forecast from BHP Group, while encouraging updates from luxury brand Burberry and education group Pearson drove optimism about the earnings season.

BHP Group Ltd climbed 2.8% after it forecast record iron ore production for fiscal 2021, helped by high prices for the commodity. Other miners Rio Tinto, Anglo American and Glencore rose more than 2%.

Global markets rallied in anticipation of more fiscal spending as Joe Biden prepared to take charge as the 46th U.S. president.

“There is a view in the markets that more spending is in the pipeline, after all, Mr Biden will want to start his presidency on a positive note,” said David Madden, market analyst at CMC Markets UK.

The FTSE 100 index rose 0.4% and the domestically focussed FTSE 250 index added 1.4%.

The FTSE 100 has recorded consistent monthly gains since November after the sealing of a Brexit trade deal and hopes of a vaccine-led economic recovery, but has recently lost steam as tighter business restrictions sparked fears of a slow rebound.

Burberry rose 3.9% as it stuck to its full-year goals and said higher full-price sales would boost annual margins and Asian demand remained strong.

Global education group Pearson jumped 8.6% after its global online sales grew 18% in 2020, helped by strong enrolments in virtual schools.

WH Smith Plc surged 10.4% to the top of the FTSE 250 index as its trading during Christmas was ahead of its expectations.

(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V, William Maclean)

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Asia markets slide as higher bond yields test tech sector

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Asia markets slide as higher bond yields test tech sector 2

By Tom Westbrook

SINGAPORE (Reuters) – Falling tech stocks in China and Hong Kong pulled Asia’s markets sharply lower on Wednesday, as recent gains in U.S. Treasury yields put lofty equity valuations under pressure even as bond markets stabilised.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.8% and has lost 3.2% for the week so far.

Chinese blue chips fell 3% and the Hang Seng headed for its sharpest daily fall in nine months with a 3.4% drop that was further stoked by a rise in stock-trading stamp duty.

Japan’s Nikkei fell 1% and mining shares dragged Australia’s ASX 200 down by 0.9%. S&P 500 futures dropped 0.6%, while EuroSTOXX 50 futures fell 0.2% and Britain’s FTSE futures fell 0.7%.

On Tuesday U.S. Federal Reserve Chairman Powell did not seem too peturbed by a selloff in Treasuries that has driven 10-year yields up by 40 basis points this year, telling Congress it was a statement on the market’s confidence in the pandemic recovery.

But he cautioned that the economy remained “a long way” from employment and inflation goals and said that rates would stay low and bond buying would proceed apace until there was “substantial further progress”.

“Powell has done enough to dampen the upswing in bond yields, but he has not derailed it,” said Vishnu Varathan, head of economics and strategy for Mizuho Bank in Singapore.

“Yields are consolidating and not retreating – and that’s a result of this optimism that’s driving bond yields which he hasn’t pushed back against expressly.”

Ten-year Treasury yields fell about two basis points after his remarks and more or less held there through the Asia session to trade at 1.340%. Wall Street indexes recouped losses but the tech heavy Nasdaq closed 0.5% lower.

VALUATIONS TESTED

Tech stocks are particularly sensitive to rising yields because their value rests heavily on earnings in the future, which are discounted more deeply when bond returns go up.

February’s rise in yields reflects not just higher inflation expectations but better growth forecasts too, and ten-year U.S. real yields are on course for their sharpest monthly rise in more than four years. [US/]

“In the next couple of days the movement of the Nasdaq 100 will be pivotal, especially for China’s big tech sector,” said CMC Markets’ analyst Kelvin Wong.

Nasdaq 100 futures were down 1% late in Asia trade.

In foreign exchange markets, commodity-linked currencies forged ahead as prices of growth-sensitive raw materials from copper to crude oil traded around milestone highs.

The Australian and Canadian dollars hit three-year peaks of $0.7945 and C$1.2560 respectively. [FRX/]

The New Zealand dollar also hit a three-year peak at $0.7384 after the central bank sounded upbeat on the economy even as it signalled – like Powell – that rates would be staying low.

Copper hit a 9-1/2 year high in London and Shanghai while benchmark Brent crude futures slipped 0.4% to $65.10 a barrel after hitting a one-year high of $66.79 on Tuesday. U.S. crude futures fell 0.8% to $61.17. [O/R]

Later on Wednesday traders’ focus will turn to German GDP data, further testimony from Powell as well as speeches from Fed members Richard Clarida and Lael Brainard.

Price moves in a handful of hot assets popular with speculators – from bitcoin to Tesla and U.S. tech shares more broadly will also be closely watched as the rise in bond yields tests their stretched valuations.

(Reporting by Tom Westbrook in Singapore. Additional reporting by Echo Wang in Miami; Editing by Lincoln Feast & Simon Cameron-Moore)

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Promise of cheap money keeps stocks buoyant

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Promise of cheap money keeps stocks buoyant 3

By Tom Westbrook and Echo Wang

SINGAPORE/MIAMI (Reuters) – Bond markets steadied, the U.S. dollar fell and stocks edged ahead on Wednesday after central banks from Washington to Wellington vowed to keep monetary policy loose for a long time, giving investors enough confidence to seek out riskier assets.

U.S. Federal Reserve Chair Jerome Powell told Congress on Tuesday the economy remained “a long way” from employment and inflation goals and that rates would stay low and bond buying proceed apace until there was “substantial further progress”.

The Reserve Bank of New Zealand on Wednesday made no changes to its rates or bond purchase programme either and said policy will need to remain stimulatory until inflation is sustained at 2% and employment hits maximum levels.

Taken together, it was enough to reassure investors that authorities won’t rush to raise rates even if inflation accelerates.

Risk-sensitive currencies rose, pushing the kiwi, Aussie and sterling to their highest levels since early 2018, while the safe-haven Japanese yen slipped. [FRX/]

MSCI’s broadest index of Asia-Pacific shares outside Japan, which has drifted 1.2% lower over the week as rising yields pressured valuations, rose 0.3% and S&P 500 futures rose 0.1%.

Tech stock selling pushed Japan’s Nikkei 0.4% lower. [.T]

Benchmark 10-year U.S. Treasury yields, which fall when prices rise, were steady at 1.3480% after closing 2.4 basis points lower following Powell’s testimony to Congress.

Powell did not seem too fussed about the selloff that has driven the 10-year yield up by 40 basis points this year, telling lawmakers it was a statement on the market’s confidence in the pandemic recovery.

But he cautioned that was a ways off and said markets would get plenty of warning about any future policy adjustments.

His comments reversed a morning sell off on Wall Street, and the S&P 500 closed 0.1% higher, although the Nasdaq, which is full of growth stocks more sensitive to higher yields, finished Tuesday down 0.5%. [.N]

“The overall takeaway from Powell is that over the next couple of months he will just keep singing the same dovish commitment song,” said Edward Moya, senior market analyst at OANDA in New York.

“Until we see more than half of the 10 million jobs come back, Powell won’t change his tune.”

Elsewhere commodity prices eased a little after hefty gains in recent days and benchmark Brent crude oil futures fell 0.5% to $65.01 a barrel. U.S. crude futures traded 0.8% lower at $61.19 a barrel. [O/R]

In currency markets, the Australian dollar hit a three-year high of $0.7945 and the New Zealand dollar made the same milestone, reaching $0.7378. [AUD/]

Sterling, which has been boosted by Britain’s vaccine rollout, briefly leapt as high as $1.4295, its best since April 2018.

Cryptocurrency bitcoin nursed losses at $49,700 after a two-day selloff.

(Reporting by Tom Westbrook in Singapore and Echo Wang in Miami; Editing by Lincoln Feast.)

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Dollar falls as risk appetite increases, kiwi ruffled by RBNZ

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Dollar falls as risk appetite increases, kiwi ruffled by RBNZ 4

By Stanley White

TOKYO (Reuters) – The dollar slipped to a three-year low against the British pound and fell against commodities currencies on Wednesday as investors increased bets that a global economic recovery will boost riskier assets.

The New Zealand dollar briefly fell but then quickly stabilised after the country’s central bank kept monetary policy on hold and said inflation and employment will remain below its targets in the medium term.

U.S. Federal Reserve Chair Jerome Powell reiterated on Tuesday that interest rates will remain low and the Fed will keep buying bonds to support the U.S. economy, which many traders say is a long-term negative factor for the dollar.

At the same time, more money is flowing toward currencies that are expected to benefit from a pick-up in global trade and to countries that are bouncing back quickly from the coronavirus pandemic, which is also weighing on the dollar.

“Signs of economic recovery are lifting commodities prices, which in turn supports currencies of commodities exporters,” said Junichi Ishikawa, foreign exchange strategist at IG Securities.

“Risk appetite has improved a lot, and this leaves the dollar at a big disadvantage.”

The British pound rose to $1.4170, the highest since April 2018.

The outlook for sterling has brightened as investors cheer Britain’s rapid coronavirus vaccination programme and its plans to ease lockdown restrictions on economic activity.

The New Zealand dollar edged up to $0.7367, close to a three-year high.

The Reserve Bank of New Zealand expressed some caution about the outlook, which may have disappointed some traders who expected central bankers to acknowledge a recent improvement in economic data.

The Australian dollar, which tends to benefits from rising metal and energy prices, jumped to a three-year high of $0.7945.

Against the euro, the dollar traded at $1.2158, close to a six-week low.

The dollar managed to rise to 105.40 Japanese yen and hit an almost three-month high against the Swiss franc, but overall sentiment was still negative on the greenback.

Powell pushed back against suggestions that loose monetary policy will lead to runaway inflation and financial bubbles, which have emerged as two important themes this year, because there is growing scepticism about the rapid pace of gains in global stocks.

For economies that have limited disruptions caused by the coronavirus outbreak, their central bankers now face questions of when to start tightening policy, which makes the dollar look less attractive, some analysts say.

The dollar index against a basket of six major currencies fell to 90.025.

In the cryptocurrency market, bitcoin halted its plunge from a record high above $50,000 and stabilised at $49,052. Square Inc has invested $170 million in the digital asset, but some analysts still argue that bitcoin’s recent surge was excessive.

Rival digital currency ether recovered from a sharp sell-off to trade up slightly at $1,591.

(Reporting by Stanley White; editing by Richard Pullin)

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