* European stocks are sinking
* Wall Street futures down 0.85%
* Image: Global Asset Performance tmsnrt.rs/2yaDPgn
* Image: Global FX rates tmsnrt.rs/2egbfVh
LONDON, Feb. 22 (Reuters) – World stocks fell on Monday as expectations for faster economic growth and inflation boosted bonds and commodities, while rising real yields made stock valuations look more tense in comparison.
MSCI’s All Country World Index, which tracks stocks in 49 countries, fell 0.25% by midday in London.
The pan-European STOXX 600 index fell 0.6% to its lowest level in 10 days. The German DAX and the French CAC 40, and the UK FTSE 100 fell 0.5% each. The Spanish IBEX 35 index and the Italian FTSE MIB each lost 0.6%.
Futures on the S&P 500 fell to their lowest level since February 5, down 0.85% one day.
Bonds have been bruised by the prospect of a stronger economic recovery and more loans as President Joe Biden’s $ 1.9 trillion stimulus package advances.
Federal Reserve Chairman Jerome Powell is giving his semi-annual testimony before Congress this week and is likely to reiterate his commitment to keep policies super easy to drive inflation for as long as necessary.
“The next week is relatively thin on the international data agenda, but after the recent rise in long bond yields, Fed Chairman Powell’s hearings in both chambers of Congress (Tuesday / Wednesday) will arouse great interest,” said Elisabet Kopelman , American economist. at SEB.
“The fact that the most recent rise in long bond yields is driven by higher real interest rates and not just inflation expectations, increases the likelihood of a moderate report.”
European Central Bank president Christine Lagarde is also expected to sound moderate in a speech later Monday.
Yields on 10-year Treasury bills have already reached 1.38%, breaking the 1.30% level and rising 43 basis points for the year so far.
Analysts at BofA noted that bonds with a maturity of 30 years had returned -9.4% in the year to date, the worst start since 2013.
“Real assets outperform financial assets in ’21 as cyclical, political, secular trends say higher inflation,” the analysts said in a note. “Rising raw materials, energy laggards in vogue, materials in secular outbreaks.”
Earlier in Asia, MSCI’s widest index of Asia-Pacific stocks outside Japan fell 1.18% after falling from a record high last week when the rise in US bond yields troubled investors.
Japan’s Nikkei gained 0.8% and South Korea 0.1%, but Chinese blue chips lost 1.4%.
A COPPER SHEET RECOVERY One of the stars is copper, a key component of renewable technology, which skyrocketed 7.7% last week to a peak in nine years. The broader LMEX base metal index rose 5.5% this week.
Oil prices followed suit, aided by tight supplies and freezing weather, bringing Brent to a 22% profit for the year so far.
On Monday, Brent crude oil futures rose 0.7% to $ 63.33 a barrel. US crude oil contributed 0.7% to $ 59.65.
All of that has been a boon for commodity-linked currencies, with the Canadian, Australian and New Zealand dollars all higher for the year so far.
Sterling hit a three-year high of $ 1,4050, helped by one of the fastest vaccinations in the world. England will ease lockdown restrictions at five-week intervals, Sky News reported Monday, hours before Prime Minister Boris Johnson would reveal details of his roadmap for the country’s reopening.
The US dollar index was relatively range-bound, with downward pressure from the country’s growing double deficits offset by higher bond yields. The index last stood at 90,342, not far from where it started the year at 90,260.
Rising government bond yields have pushed the dollar against the yen to 105.60 as the Bank of Japan actively controls interest rates at home.
The euro was stable at $ 1.2135, between support at $ 1.2021 and resistance at $ 1.2169.
One commodity that is not doing very well is gold, partly as a result of rising bond yields and partly because investors are wondering if cryptocurrencies could be a better hedge against inflation.
Gold was at $ 1,795 an ounce and had started the year at $ 1,896. Bitcoin fell 5.8% on Monday at $ 54,127 after a record high of $ 58,354.
Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney; edited by Larry King