Global shares jump after worst week in 2 years; bond yields up

Oil rises as markets stabilise; gold climbs

NEW YORK, Feb 12, (Agencies): World shares rallied on Monday in a broad advance that brushed off fresh rises in global bond yields that have been driven by inflation fears as investors shifted asset allocations after the worst week in global markets in the past two years.

The yield on US five-year Treasury Inflation Protected Securities, bonds known as TIPS that are designed to protect against inflation, rose to its highest level since 2009 as concerns about rising consumer prices and a bigger US budget deficit sparked a selloff in fixed income markets.

The dollar fell against the euro following its best week against the single currency in nearly 15 months. A return of risk appetite hurt the US currency and helped higher-yielding emerging market currencies as well as commodity-linked currencies like the Australian and Canadian dollars.

Volatility picked up, with the major indexes on Wall Street climbing more than 1 percent shortly after the open, paring about half the advance to once again rise more than 1 percent.

MSCI’s all-country world index of stock performance in 47 countries rose 0.95 percent, led by Apple Inc and Amazon.com.

The pan-European FTSEurofirst 300 index rose 1.33 percent while MSCI’s gauge of emerging market stocks rose 0.92 percent.

A major shift in outlook is taking place that involves the reallocation across different areas and sectors of the market, said Peter Kenny, senior market strategist at Global Markets Advisory Group, in New York.

The dollar index fell 0.18 percent, with the euro up 0.29 percent to $1.2269. The Japanese yen strengthened 0.13 percent versus the greenback at 108.67 per dollar.

Oil began to recoup some of last week’s steep losses as global equities steadied.

Brent crude futures rose 30 cents to $63.09 a barrel and US West Texas Intermediate crude futures for March delivery rose 51 cents to $59.71 a barrel.

US

Wall Street’s main indexes rose for a second straight session on Monday, led by gains in technology and financial stocks, after its worst week in two years as the specter of rising inflation led to fears of accelerated interest rate hikes.

Nine of the 11 major S&P sectors were higher, with only the interest-rate sensitive utilities and real estate indexes in the red.

By 11:43 a.m. ET, the Dow Jones Industrial Average was up 287.18 points, or 1.19 percent, at 24,478.08. The S&P 500 was up 25.88 points, or 0.99 percent, at 2,645.43. The Nasdaq Composite was up 86.88 points, or 1.26 percent, at 6,961.37.

Despite gains of about 1.5 percent on Friday, the three indexes are still 6 percent to 6.5 percent lower since Feb. 2, when strong US jobs and wages growth data sparked inflation fears, igniting a rally in bond yields and a selloff in stocks.

Equities for years have looked relatively attractive compared to the low yields offered by bonds, but the rise in Treasury yields has diminished the allure of stocks, especially with stock valuations at historically expensive levels.

That, along with a reversal of bets on low volatility drew the three major US indexes to correction territory last week.

Wall Street’s fear gauge, VIX, short for the CBOE Volatility index was last at 27.94 on Monday, more than double its 50-day moving average but trading in a narrow 2-point range.

The S&P materials index rose 1.2 percent and industrials gained 0.73 percent. They were outdone only by the energy sector’s 1.46 percent jump as oil prices rose.

Among stocks, General Dynamics fell 0.8 percent after the US defense contractor said it would buy smaller rival CSRA for about $6.8 billion. CSRA soared 32 percent.

Cisco was up 2.6 percent and American Express gained 1.5 percent after Instinet upgraded the two Dow components to “buy”.

Advancing issues outnumbered decliners on the NYSE by 1,692 to 1,150. On the Nasdaq, 1,752 issues rose and 1,095 fell.

UK

British shares rebounded on Monday after a tough week, thanks to a relief rally in commodities stocks.

But with market volatility tipped to stay elevated, investors were divided over whether to buy the dip.

The FTSE 100 was up 1.2 percent at 7,177.06 points at its close, regaining some of last week’s losses but still near a 13-month low. Some 147 billion pounds was wiped off the leading UK stock index in the past two weeks as heady markets nosedived.

Energy, materials and financials gave the index its biggest boost as the cyclical stocks that had suffered the worst losses last week led the gains.

Oil majors Royal Dutch Shell and BP both rose around 2 percent, as crude prices also recovered from last week’s declines.

Miners Anglo American, Glencore, BHP Billiton and Rio Tinto were among the biggest gainers, with steel producer Evraz top of the FTSE, up 5.8 percent, as metals prices rose.

Some investors said they were staying on the sidelines while the market mood developed.

The FTSE 250 gained 0.8 percent, with some big moves on broker notes and results.

Victrex shares jumped as much as 5.5 percent after the mid-cap polymer firm got a double upgrade from Bank of America Merrill-Lynch to ‘buy’.

Tourism and insurance group Saga gained 3.7 percent after it said it had signed a quote share deal with NewRe and German reinsurer Hannover Re .

Bucking the trend in the mining sector was Acacia Mining , down nearly 4 percent after scrapping its 2017 dividend.

Tanzania’s largest gold miner also said full-year core earnings dropped by more than a third due to a ban on unprocessed mineral exports in the country.

Small-cap UP Global Sourcing sank 47.5 percent after a trading update which Shore Capital analyst Darren Shirley called ‘disappointing”.

Asia

Asian markets struggled to hold early gains on Monday after last week’s global rout, with analysts warning of further volatility across trading floors.

Hong Kong, which sank more than nine percent last week, was up 0.7 percent in the afternoon before a late sell-off saw it close 0.2 percent lower, though Shanghai closed up 0.8 percent and Singapore rose 0.1 percent.

Seoul gained 0.9 percent, with traders cheered by signs of a thaw in relations between North and South Korea during the Winter Olympics after Kim Jong Un -- whose sister attended the opening ceremony in Pyeongchang -- invited the South’s President Moon Jae-in for a summit in Pyongyang.

Taipei added 0.5 percent and Bangkok 0.3 percent but Sydney eased 0.3 percent and Manila dipped 0.5 percent. Tokyo was closed for a public holiday.

The gains came after a late rally on Wall Street helped all three main indexes end on a positive note Friday, though still well down over the week.

Key figures around 0820 GMT. Hong Kong - Hang Seng: DOWN 0.2 percent at 29,459.63 (close)

Shanghai - Composite: UP 0.8 percent at 3,154.13 (close)

Tokyo - Nikkei 225: Closed for a public holiday

Dollar/yen: DOWN at 108.62 yen from 108.78 yen

Oil

Oil rose on Monday, recouping some of last week’s steep losses as global equities steadied after their biggest one-week decline in two years.

Brent crude futures were up nearly 2 percent, or 92 cents, at $63.71 a barrel by 1442 GMT, while US West Texas Intermediate futures rose $1.10 to $60.30.

A weaker dollar helped to boost oil by making dollar-priced crude cheaper for holders of other currencies.

European shares took their lead from Friday’s rise on Wall Street, while other commodities including copper and gold also strengthened.

Consumption remains robust, even though rising US crude production has knocked oil off its 2018 highs above $70 and threatened the efforts of the Organization of the Petroleum Exporting Countries to prop up prices by reining in supply.

US oil production has risen above 10 million barrels per day (bpd), overtaking top exporter Saudi Arabia and coming within reach of top producer Russia.

OPEC and partners including Russia have agreed to cut their crude output by 1.8 million bpd for a second year, but US production looks set to continue to grow.

US energy companies added 26 oil rigs looking for new production last week, boosting the count to 791, the highest since April 2015, energy services company Baker Hughes said on Friday.

Gold

Gold prices rose on Monday as the dollar steadied, but gains are expected to be muted ahead of inflation data from the United States later this week that could mean US interest rates rise faster than expected.

Spot gold was up 0.4 percent at $1,321.28 an ounce at 1445 GMT. It has fallen more than three percent since hitting a 17-month peak at $1,366.07 in January. US gold futures rose 0.5 percent to $1,3222 an ounce.

Worries about inflation in the United States surfaced after data this month showed jobs growth surged and wages rose, bolstering expectations that the US labour market would hit full employment this year.

US inflation data for January is due on Wednesday and the US Federal Reserve next meets on March 20-21. “The story is and will be about US monetary policy and dollar direction,” Julius Baer analyst Carsten Menke said. “US growth is more solid, wages are rising and the worry is the Fed will be forced into more rate hikes than currently expected.”

A lower US currency makes dollardenominated gold cheaper for holders of other currencies, potentially boosting demand. The dollar was steady against a basket of six major currencies as a bounce in equity markets ended a strong run for the greenback, used by investors as a safe place to park assets in times of financial market volatility.

“Gold has picked up a little in the last 24 hours, as a hint of dollar weakness creeps back into markets,” said Jordan Eliseo, chief economist at gold trader ABC Bullion.

Hedge funds and money managers slashed their net long position in COMEX gold for the first time in eight weeks in the week to Feb. 6, and cut it in silver, US Commodity Futures.

Trading Commission data showed on Friday. Gold faces strong resistance at the 100-day moving average around $1,345. A break of support at $1,300 could see the market trying to test the 21-day moving average at around $1,275.

Silver gained one percent to $16.52 an ounce, platinum added 0.1 percent to $965 an ounce and palladium was up 0.8 percent at $984 an ounce.