* Powell says tapering 'still a ways off'European shares sag
after
late roll over in U.S. stocks PBOC rolls over 100 bln yuan of
maturing 400 bln MLF
* China data points to slowing recovery
*
By Marc Jones
LONDON, July 15 (Reuters) - Europe's share markets
spluttered and government bond yields burrowed lower on Thursday
after the head of the Federal Reserve dampened taper talk and
traders struggled with the rapid global rise in COVID-19 Delta
variant cases.
There was a giant helping of Chinese data, including a
slightly below consensus second quarter GDP reading, to digest
too as well as plenty more earnings numbers to come.
China's data was hardly dismal - average growth actually
surpassed Q1 while June retail sales and industrial output beat
expectations. But it did show authorities, who only last week
squirted one trillion yuan into the financial system, will
ensure conditions stay loose.
But markets' delight after Jerome Powell told Congress he
saw no need to rush the shift towards tighter post-pandemic
monetary policy, had not lasted long.
A 0.7% rise in Chinese shares was offset as Japan's Nikkei
fell more than 1% and London, Paris, Frankfurt
and Wall Street futures all shuffled 0.1%-0.8%
lower in early European moves.
The main all-world indicies were also off
their recent record highs, tempered possibly by rising COVID-19
cases around the globe and signs the post-pandemic bounce in
company earnings may also be hitting a peak.
"The market is fearing the Delta variant could take a hold
of different economies so you are almost seeing that we are back
to the 'bond yields lower, tech doing well' scenario," said
Justin Onuekwusi, portfolio manager at Legal & General
Investment Management.
The likes of Amazon and Google are up 6-8% this month, while
China's biggest tech firms Alibaba and Tencent have surged more
than 12% since China's central bank made a supportive tweak for
the first time in nearly a year on Friday.
MYSTERIOUS WAYS
Traders were also waiting to see if the second day of Fed
Chair Powell's testimony to the U.S. Congress would provide any
more signals.
He had said on Wednesday that the U.S. economy was "still a
ways off" from levels the central bank wanted to see before
tapering its monetary support.
He also said he is confident that recent price hikes are
associated with the country's post-pandemic reopening and are
driving up inflation will fade.
His comments came after data published this week showed
consumer prices increased by the most in 13 years in June.
Bond yields dipped globally, with the 10-year U.S.
Treasuries yield slipping to 1.334%, having peaked
out at 1.423% on Wednesday.
The yield on inflation-protected bonds, sometimes called the
real yield, dropped to minus 1.027%, near its
lowest levels since February.
While Powell's comments fanned buying in bonds, concerns
about inflation hardly disappeared.
"The CPI numbers were pretty shocking to me," said Nobuyasu
Atago, chief economist at Ichiyoshi Securities. "People say
rises in used car prices are the main culprit but it's not just
that. New cars, home electronic goods and services are all
rising. And the past record shows when energy prices rise, that
impact normally last for about two years."
In the currency market, Powell's dovish stance put a minor
dent on the U.S. dollar.
The euro bounced back to $1.1845 from Wednesday's
three-month low of $1.1772. The dollar stood at 109.73 yen
after a 0.6% fall on Wednesday.
The Chinese yuan dipped to 6.4628 per dollar in Asia
after hitting a three-week high of 6.4508 overnight.
Gold jumped to a one-month high of $1,829.8 per ounce on
Wednesday and last stood at $1,827.9.
Oil prices dropped though after major global oil producers
came to a compromise about supply and after U.S. data showed
demand slacked off a bit in the most recent week.
Brent futures lost 0.7% to $74.27 per barrel. U.S.
crude futures dropped away from this month's 7-year high
to $72.56 per barrel, while UK-listed oil majors Royal Dutch
Shell and BP fell almost 3% in early trading.
Saxo Bank's head of FX strategy, John Hardy, said there was
a pattern of market moves starting but then unwinding quickly at
the moment.
"Everybody is just really uncertain on the transitory
inflation narrative," Hardy said. "It feels like we need to get
three more months of data before we can really get a grip on
this market."
($1 = 6.4693 Chinese yuan)
(Reporting by Marc Jones, additional reporting by Sujata Rao,
editing by Angus MacSwan)
BP (BP.)
