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GLOBAL MARKETS-Shares pause, awaiting next move in bonds

Published 02/03/2021, 08:03 pm
Updated 02/03/2021, 08:06 pm
© Reuters.
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By Huw Jones

LONDON, March 2 (Reuters) - European shares paused on Tuesday as investors sought to guess the bond market's next move, while weak German retail sales were a stark reminder of continued COVID-19 fallout on the region's biggest economy.

Overnight falls in Asian stockmarkets, after a senior Chinese official expressed wariness about the risk of asset bubbles in foreign markets, and a drop in oil prices also weighed on sentiment, but the dollar was steady, along with U.S. Treasuries.

Analysts said a pause was to be expected after European shares had marked their best day in nearly four months on Monday when bond markets stabilized from a sharp selloff last week.

"We are in the yield waiting room to see whether central bankers push back this week on the ambivalence we saw last week about interest rates," said Michael Hewson, chief market analyst at CMC Markets.

"Potentially that was a mistake, giving the impression that the U.S. did not really care about sharp rises in yields and sending the wrong message."

The pan-European STOXX 600 share index .STOXX edged 0.2% higher, with Paris .FCHI down, while Frankfurt .GDAXI and London .FCHI eked out slim gains.

Investors will scrutinise speeches from U.S. Federal Reserve officials, starting with Lael Brainard at 1800 GMT on Tuesday, for any tweaks to messages on bond yields.

European Central Bank vice president Luis de Guindos said the ECB has the flexibility to counter any undesired rise in bond yields, helping to soothe the German bund in early trading.

"We will have to see whether this increase in nominal yields will have a negative impact on financing conditions," de Guindos told Portuguese newspaper Público in comments published on Tuesday.

Among the day's economic data, German retail sales tumbled more than expected in January as an ongoing lockdown to fight the coronavirus pandemic curtailed retail spending.

U.S. stock futures were weaker 1YMcv1 EScv1 NQcv1 .

CHINA BUBBLE WARNING

Shares in mainland China and Hong Kong fell after a top regulatory official expressed concerns about the risk of bubbles bursting in foreign markets. markets are trading at high levels in Europe, the U.S. and other developed countries, which runs counter to the real economy," Guo Shuqing, head of the China Banking and Insurance Regulatory Commission, told a news conference.

Chinese blue-chips .CSI300 slipped 1.3% while Hong Kong's Hang Seng Index .HSI lost 1.2%.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.33%. Japan's Nikkei .N225 was down 0.8% as some investors booked profits on defensive energy and utility shares before the end of the fiscal year this month. stocks .N rallied overnight, with the S&P 500 .SPX posting its best day in nearly nine months, as bond markets calmed after a month-long selloff.

U.S. stocks were roiled last week when a selloff in Treasuries pushed the 10-year Treasury yield US10YT=RR to a one-year high of 1.614%. The 10-year yield was flat at 1.4308%. US/

Bitcoin BTC=BTSP fell 1% to $49,135 after rising nearly 7% on Monday.

The U.S. dollar index =USD was up 0.3% against a basket of currencies to stand at 91.32. USD/

A stronger greenback weighed on gold XAU= , with the yellow metal at $1,719.74 an ounce, down 0.2%. GOL/

Oil prices slid on expectations that OPEC would agree to raise oil supply at a meeting this week. Brent crude LCOc1 dropped 68 cents, or 1.05%, to $63.01 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 fell 58 cents, or 0.9%, to $60.05 a barrel.

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