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Stocks struggle as tech slide erases commodities surge

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Stocks struggle as tech slide erases commodities surge 1

By Danilo Masoni

MILAN (Reuters) – World shares struggled on Tuesday as a rally in commodity-related assets gave in to pressure on heavily weighed tech stocks and investors awaited reassurance from U.S. Federal Reserve Chair Jerome Powell on the path for monetary policy in United States.

European tech stocks were on set for their worst day in four months, down 2.7%, and futures on the Nasdaq fell 1.5% after losses in stocks like Apple and Tesla dragged the index down 2.5% on Monday.

“The prospect of a less dovish tone from central banks, sparked by rising inflation, is causing stock traders to reduce their exposure to equities, especially overbought sectors like tech,” said Pierre Veyret, analyst at ActivTrades in London.

The MSCI world equity benchmark fell 0.1% to fresh two-week lows by 1138 GMT, having earlier risen on gains in commodity-heavy equity indexes in Asia. S&P 500 futures also fell, and were last down 0.5%.

Tesla shares were set to plunge into the red for the year, hit by a fall of bitcoin, in which the electric carmaker recently invested $1.5 billion.

The level of angst was also reflected in equity volatility gauges which rose to multi-week highs, while on bond markets German and U.S. yields moved in different directions, even though both remained just below the highs hit on Monday.

After being knocked off from eight-month high by European Central Bank chief Christine Lagarde signalling discomfort with the recent surge in yields, 10-year Bund yields resumed their upward trend and were last at -0.297%.

Ten-year Treasury yields were steady below Monday’s one-year high of 1.394% and were last at 1.370%.

Fed Chair Powell is expected to be equally reassuring on the central bank’s dovish stance when he gives his congressional testimony at 1500 GMT in Washington.

“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.

Commodity prices strengthened again.

Oil prices jumped by more than $1 at one point, 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 0.7% at $65.7 a barrel after earlier hitting a fresh 13-month high of $66.79, while U.S. crude rose 0.8% to $62.17 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 90.137, with the euro flat at $1.215.

Bitcoin fell as much as 17%, sparking a sell-off across cryptocurrency markets as investors grew nervous at sky-high valuations.

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

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G4S urges shareholders to accept Allied deal as bid battle ends

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G4S urges shareholders to accept Allied deal as bid battle ends 2

By Yadarisa Shabong

(Reuters) – British private security group G4S on Tuesday urged shareholders to accept Allied Universal’s 3.8 billion pound ($5.4 billion) final offer after the end of the U.S. bidder’s drawn-out takeover battle with Canada’s GardaWorld.

Hostile bidder GardaWorld had called a halt to the contest on Monday by telling the UK’s Takeover Panel it would not increase its December bid of 235 pence per share for the world’s largest private security company.

Allied on Tuesday said it would not increase the 245 pence per share offer it announced on Dec. 8, making it the final bid.

G4S had backed that offer last year after repeatedly rejecting GardaWorld’s hostile advances, but low shareholder acceptance forced repeated extensions to offer deadlines.

“G4S directors unanimously recommend that G4S shareholders accept the final Allied Universal offer,” The London-listed company said.

Allied on Tuesday extended its offer deadline to March 16 and the acceptance condition was lowered to 75% from 90% in nominal value and voting rights.

It has largely obtained the required antitrust regulatory approvals in the United States and European Union, Allied Universal added, though Britain has yet to approve the deal.

“The biggest issue now is probably the pension deficit in the UK, which has constricted M&A deals in the recent past involving G4S UK businesses,” said Morningstar analyst Michael Field.

G4S last year sold most of its cash-handling business to rival Brinks Co but held on to the UK operations with attached pension obligations.

In its offer document, Allied said it planned to evaluate the possibility of exiting the prison business, where G4S has faced problems in the past, and some other markets, such as Iraq, Afghanistan, Sudan and Uganda.

“Allied will have to work with the pension trustees to come to an arrangement if it wishes to divest anything here (in the UK),” Field added.

Shares in G4S traded flat at 242 pence at 0855 GMT.

($1 = 0.7102 pounds)

(Refiles to restore dropped letter in headline)

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Rashmi Aich and David Goodman)

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Commodities rally, stocks steady, yields off highs

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Commodities rally, stocks steady, yields off highs 3

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 4

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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