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UK retail sales drop, NatWest loss dampen FTSE 100 mood

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UK retail sales drop, NatWest loss dampen FTSE 100 mood 1

By Shivani Kumaresan and Amal S

(Reuters) – The FTSE 100 was muted on Friday as a bigger-than-expected drop in January retail sales underscored the business damage from a prolonged nationwide lockdown, while NatWest group fell after swinging to an annual loss.

The commodity-heavy FTSE 100 was flat as gains in miners Anglo American, Rio Tinto and BHP Group capped losses.

Oil producers BP and Royal Dutch Shell fell 1.2% and 0.5%, respectively as crude prices slid.

Data on Friday showed British retail sales tumbled much more than expected in January as non-essential shops went back into coronavirus lockdowns. Flash readings of business activity data, due at 0930 GMT, are likely to show the services sector struggling to return to growth in February.

“The 8.2% fall was considerably higher than we’d expected (around 4%), and provides clear evidence the hit to consumer spending is noticeably larger than it was during the November restrictions,” said James Smith, market economist at ING.

He added focus will now be on UK’s COVID-19 vaccination program and easing of restrictions, to drive economic recovery.

The FTSE 100 has recovered nearly 35% from its March 2020 lows but has been largely range-bound since the beginning of this year as a nationwide lockdown hurt business activity, undermining hopes of economic growth in the second half of the year.

The domestically-focused mid-cap FTSE 250 index rose 0.2%, with consumer and industrials stocks leading gains.

NatWest fell 0.6% after the financial services provider swung to a full-year loss for 2020 after COVID-19 lockdowns crunched household spending.

Segro Plc rose 1.7% after the real estate investment trust reported a near 11% jump in annual profit for 2020.

Banking group TBC Bank fell 2.3% after a slump in annual underlying profit due to lower interest rates and limited lending growth in the fourth quarter from the COVID-19 pandemic.

(Reporting by Shivani Kumaresan and Amal S in Bengaluru; Editing by Vinay Dwivedi and Krishna Chandra Eluri)

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Dollar slips further after disappointing jobs data, sterling shines

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Dollar slips further after disappointing jobs data, sterling shines 2

By Tommy Wilkes

LONDON (Reuters) – The U.S. dollar slipped further on Friday and the euro rebounded after disappointing U.S. data dented optimism for a speedy recovery from the COVID-19 pandemic, while sterling edged towards the $1.40 mark.

The U.S. currency had been rising as a jump in Treasury yields on the back of the so-called reflation trade encouraged investors back into the greenback.

But an unexpected increase in U.S. weekly jobless claims soured the economic outlook and sent the dollar lower overnight.

On Friday it traded down 0.1% against a basket of currencies, the dollar index now at 90.474.

The string of soft labour data is weighing on the dollar even as other indicators have shown resilience, and as President Joe Biden’s pandemic relief efforts take shape, including a proposed $1.9 trillion spending package.

The euro rose 0.2% to $1.2113. The single currency showed little reaction to German and French flash purchasing manager index data, which unsurprisingly showed a slowdown in activity in January.

Despite the recent rise in U.S. yields, many analysts think they won’t climb too much higher, limiting the benefit for the dollar.

ING analysts said that “the rise in rates will be self-regulating, meaning the dollar need not correct too much higher.”

They see the greenback index trading down to the 90.10 to 91.05 range

Sterling has been the standout performer in 2021 and on Friday rose to $1.3987, an almost three-year high amid Britain’s aggressive vaccination programme.

Given the size of Britain’s vital services sector, analysts say the faster it can reopen the economy the better for the currency.

The dollar bought 105.46 yen, down 0.2% and a continued retreat from the five-month high of 106.225 reached Wednesday.

Many analysts expect the dollar to weaken over the course of the year as it has traditionally done during times of global economic recovery, though it might take some time to develop.

“It looks to me like there’s some exhaustion in that just-straight global reflation theme,” leading the dollar to trend largely sideways for now, said Daniel Been, head of FX at ANZ in Sydney.

(Additional reporting by Kevin Buckland in Tokyo; Editing by Hugh Lawson)

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Bitcoin is ‘economic side show’ and poor hedge against stocks – JP Morgan

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Bitcoin is 'economic side show' and poor hedge against stocks - JP Morgan 3

By Stanley White

TOKYO (Reuters) – Bitcoin is an “economic side show” and a poor hedge against a decline in equity prices, analysts at JP Morgan said in a sobering assessment that could undercut the cryptocurrency’s rise to record highs.

Current prices are well above JP Morgan’s estimates of fair value and the mainstream adoption of bitcoin increases its correlation with cyclical assets, which reduces the benefits of diversifying into bitcoin, the investment bank said in a memo.

Bitcoin, the most popular cryptocurrency, last traded at $51,116 on Friday, down from a record high of $52,640 reached on Wednesday. Rival cryptocurrency ether traded near a record of $1,951 reached earlier on Friday.

Bitcoin has surged by 45% so far this month, fuelled by signs it is winning acceptance among mainstream investors and companies, such as Tesla, Mastercard and BNY Mellon, but many observers remain sceptical of the unregulated and highly volatile digital asset.

“Crypto assets continue to rank as the poorest hedge for major drawdowns in equities, with questionable diversification benefits at prices so far above production costs, while correlations with cyclical assets are rising as crypto ownership is mainstreamed,” analysts at JP Morgan said.

Some of bitcoin’s supporters argue that the cryptocurrency is “digital” gold that can hedge against inflation and declines in the dollar.

Based on that logic, bitcoin would need to rise to $146,000 in the long-term for its market capitalisation to equal total private-sector investment in gold via exchange-traded funds or bars and coins, according to JP Morgan.

Tesla’s chief executive Elon Musk said on Thursday that owning bitcoin was only a little better than holding cash. He also defended Tesla’s recent purchase of $1.5 billion of bitcoin, which re-ignited mainstream interest in the digital currency.

(Reporting by Stanley White; Editing by Sam Holmes)

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Asian stocks step back from record highs on rising bond yields, weak U.S. data

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Asian stocks step back from record highs on rising bond yields, weak U.S. data 4

By Swati Pandey

SYDNEY (Reuters) – Asian stocks pulled back from all-time peaks on Friday as higher longer-dated bond yields and underwhelming U.S. data dented investor confidence in a faster economic recovery from the COVID-19 pandemic, while gold hit a seven-month trough.

MSCI’s broadest index of Asia Pacific shares outside of Japan was last down 0.1% at 733.67 from a record high of 745.89 touched on Thursday.

The index is on track for a small weekly loss after two consecutive weeks of gains.

Since the start of the year, the index has surged nearly 10.5% largely led by easy monetary and fiscal policies around the world.

On Friday, Australia’s benchmark S&P/ASX 200 index was down 0.8% while Japan’s Nikkei fell 0.4%.

Chinese shares started in the red with the blue-chip CSI300 off 0.6%.

“The recent move up in longer dated core yields appears to be weighing on equity investors’ mind,” said Rodrigo Catril, forex strategist at National Australia Bank.

Core bond yields have pushed higher globally led by the so-called “reflation trade” where investors wager on a pick-up in growth and inflation. Successful coronavirus vaccine roll-outs so far and hopes of massive fiscal spending under U.S. President Joe Biden have spurred reflation trades.

Germany’s 10-year yield on Thursday posted its highest close since June, British 10-year yields traded at a 10-month top of 0.65% and U.S. Treasury yields are hovering near one-year highs around 1.3%, a large factor supporting the U.S. dollar.

Rising bond yields hurt the appeal of gold, with spot prices hitting a seven-month low of $1,766 an ounce on Friday.

While rising yields weighed on investor sentiment, “disappointing U.S. jobless figures didn’t help the cause either,” Catril added.

An unexpected increase in the number of Americans seeking jobless benefits hung heavy on outlook. The Labor Department reported initial unemployment claims rose by 13,000 to 861,000, injecting skepticism about how quickly the U.S. economy could rebound from the global pandemic.

Further, U.S. housing starts fell 6.0% in January, the first decline in five months.

On Wall Street, the Dow fell 0.38%, the S&P 500 lost 0.44%, and the Nasdaq Composite 0.72%.

In currencies, the dollar was steady with its index at 90.568.

The British pound hit its highest in over three years at $1.3965 led by the country’s successful vaccine roll-out where 16.5 million people have already been innoculated. It is on track for a sixth straight weekly rise.

The euro is poised for a small weekly loss. The single currency was last at $1.2085.

The risk sensitive Australian dollar was on track for a third straight weekly rise, last trading at $0.7762.

In commodities, oil markets saw some profit-taking following days of gains that were driven by a deep freeze across Texas that weighed on production.

Brent crude fell $1.17 to settle at $62.76 a barrel. U.S. West Texas Intermediate (WTI) crude futures slipped $1.37 to $59.15 a barrel.

Copper surged nearly 3% to its highest since April 2012 on Thursday led by demand from Chinese investors who returned from a week-long holiday.

(Reporting by Swati Pandey in Sydney; Additional reporting by Pete Schroeder in Washington; Editing by Sam Holmes and Ana Nicolaci da Costa)

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