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By Ritvik Carvalho and Wayne Cole
LONDON (Reuters) – Global stocks stalled on Monday as sharp drops in gold and oil prices briefly spooked sentiment, while the dollar hit four-month highs against the euro after the ‘An optimistic US jobs report pushed bond yields up.
European equities were mixed early in the session as lower commodity prices weighed on the UK blue chip index, while other regional indices remained near recent highs with the end of the trading season. profits.
The FTSE Eurofirst 300 index was trading flat, the UK FTSE 100 index fell 0.3% and the German DAX 30 fell 0.3%.
The MSCI All Country World Index, which tracks the shares of 49 countries, remained stable that day.
The markets were rocked early by a sudden drop in gold as a breakout of $ 1,750 triggered stop loss sales to bring it down to $ 1,684 an ounce. It was down 1% for the last time at $ 1,745.
Brent also fell 2%, fearing the spread of the Delta variant of the coronavirus would dampen travel demand.
The holidays in Tokyo and Singapore created slim trading conditions, adding to the volatility. Yet after a first fall, the MSCI’s largest Asia-Pacific stock index outside of Japan rallied to 0.1%.
They were helped by the Chinese blue chip index which rose 1.3%. Japan’s Nikkei was closed, but futures were trading a modest 20 points below Friday’s close.
Nasdaq futures slipped 0.1% and S&P 500 futures slipped 0.2%.
Chinese trade data released over the weekend beat expectations, while figures released on Monday showed inflation had slowed to 1% in July, offering no obstacle to further stimulus.
The US Senate has come close to passing a $ 1 trillion infrastructure package, though it still has to go through the House.
Investors were still assessing whether Friday’s strong US payroll report would allow the Federal Reserve to take one more step toward withdrawing its stimulus measures.
“What we are seeing is a small profit taking anticipated due to the fear that tapering will take place earlier in September. But as you can see this has little impact as the effect of a better The economy far outweighs the substitution effect of rising interest rates, ”said Sébastien Galy, senior macro-strategist at Nordea Asset Management.
However, the pace of the cut was still on hold and would decide when a real rate hike would take place, he said. The Fed buys $ 120 billion in assets per month, so a $ 20 billion cut would end the program in six months while a $ 10 billion cut approach would take a year.
The spread of the Delta variant could argue for a longer slowdown, with US cases returning to levels seen in last winter’s outbreak with more than 66,000 people hospitalized.
The July CPI figures due this week should also confirm that inflation has peaked, as used vehicle prices finally came down after huge gains.
There are four Fed officials this week who will no doubt offer enough water to markets looking for clues as to when to cut.
Meanwhile, stocks have been mostly supported by a strong earnings season in the US. BofA analysts noted that companies in the S&P 500 were following a 15% gain on second-quarter earnings, with 90% reporting.
“However, companies whose earnings exceeded expectations experienced mixed reactions to their stock prices the day after the results were released, and the hiccups were penalized,” they wrote in a note.
“The forecast is stronger than average, but consensus estimates for two-year growth suggest a slowdown amid macroeconomic concerns.”
Financials strengthened on Friday as a steeper yield curve is seen to benefit bank earnings, while also penalizing the tech sector where valuations are very high.
US 10-year bond yields were up 1.29% following the jobs report, after hitting their lowest since February last week at 1.177%.
This jump gave the dollar a big boost and pulled the euro down to $ 1.1760, and briefly to its lowest since April at $ 1.1740. The dollar also climbed to 110.22 yen and moved away from last week’s low of 108.71.
This brought the US currency index to 92.882 and closer to the July high of 93.194.
Oil prices have fallen further after suffering their biggest weekly drop in four months, fearing coronavirus-related travel restrictions threaten upward demand expectations. [O/R]
Brent lost $ 1.29 to $ 69.41 a barrel, while US crude lost $ 1.34 to $ 66.94.
(Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney; editing by Robert Birsel)
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