By Huw Jones
LONDON, Jan 12 (Reuters) - Shares were mixed on Tuesday as
investors paused to assess how much worse the COVID-19 pandemic
could get while waiting for a new earnings season on Wall Street
to inject fresh direction.
U.S. bonds remained under pressure, with yields building on
their 10-month highs, though not yet at levels that make them
more attractive than stocks, analysts said.
Blue chip indices in London, Paris and
Frankfurt were little changed in early trading on
Tuesday. European shares hit their highest levels in 10 months
last week but had eased on Monday.
Oil majors BP, Royal Dutch Shell and Total
gained as crude prices rose on expectations of a
drawdown in U.S. stockpiles.
"It's a little bit of a pause for reflection after getting
off to an absolute flyer this year," said Michael Hewson, chief
market analyst at CMC Markets.
"The main focus now is how much worse can it get in respect
to COVID in the UK and Europe, and is China starting to see
evidence of a second wave," Hewson added.
There was little in the way of major corporate earnings news
or key economic data as markets waited for the new earnings
season on Wall Street, with banks JPMorgan, Citi and Wells Fargo
reporting on Friday.
"The big takeaway from those will be, how much more will
they set aside in terms of loan-loss provision, as they were
quite heavy in 2020, and how many of the U.S. banks restart
buybacks and dividends," Hewson said.
"I suspect it won't be as many as people think."
A selloff in bonds was fuelled by the prospect of more U.S.
government stimulus under President-elect Joe Biden, who takes
office next week.
Yields were also propped up by markets bringing forward bets
on Federal Reserve interest rate hikes to 2023, and a withdrawal
or tapering of asset purchases before then.
The yield on benchmark U.S. government 10-year debt
, which rises when prices fall, gained 1.6 basis
points to 1.149% after hitting a fresh 10-month high of 1.1580%.
S&P 500 futures were 0.14% higher.
The U.S. dollar held its recent gains, helped by the
spike in U.S. Treasury yields.
PROFIT-TAKING
Consolidation was a theme in Asia overnight as well, where
MSCI's broadest index of Asia-Pacific shares outside Japan
fell 0.5% after touching an all-time high on
Monday, led by a 2.6% drop in South Korea as investors took some
profit from a soaring Kospi.
Drugmakers lifted Japan's Nikkei to a fresh
three-decade high after reports of another effective COVID-19
treatment, though the index eased to be 0.16% lower in the
afternoon.
Strong inflows helped Chinese blue chips rise
1.11%.
A resurgent U.S. dollar clung to four days of gains against
other major currencies, holding the euro and yen
close to multi-week lows.
"We've seen a very strong week or so (in equities) and I
think the lower moves we are seeing are a bit of profit-taking,"
said Chad Padowitz, chief investment officer at Talaria Capital
in Melbourne.
Overnight, the Nasdaq led modest losses on Wall
Street, falling 1.3% as investors sold tech giants who have
taken actions against Trump and his supporters.
Brent crude was up 0.68% at $56.04, while U.S. crude
traded at $52.65 per barrel, up 0.4%.
Gold, which has been sold as U.S. yields rise because
it pays no interest, steadied at $1,853 an ounce, up 0.5%
(Reporting by Huw Jones in London; Additional reporting by
Paulina Duran in Sydney; Editing by Pravin Char)
