* Sinking of European stocks
* Wall Street futures fall 0.85%
* Graph: Global asset performance tmsnrt.rs/2yaDPgn
* Graph: World exchange rates tmsnrt.rs/2egbfVh
LONDON, February 22 (Reuters) – World equities plunged on Monday, with expectations of faster economic growth and inflation shaking bonds and boosting commodities, while rising real yields meant that valuations of stocks seemed more strained in comparison.
The MSCI Worldwide All Countries Index, which tracks stocks from 49 countries, fell 0.25% at noon in London.
The pan-European index STOXX 600 fell 0.6%, reaching the lowest index in 10 days. Germany’s DAX and France’s CAC 40 and Britain’s FTSE 100 fell 0.5% each. Spain’s IBEX 35 index and Italy’s FTSE MIB lost 0.6% each.
S&P 500 futures fell to their lowest level since February 5, down 0.85% on the day.
The bonds were hampered by the prospect of a stronger economic recovery and greater indebtedness as President Joe Biden’s $ 1.9 trillion stimulus package moves forward.
Federal Reserve Chairman Jerome Powell gives his semiannual testimony to Congress this week and will likely reiterate his commitment to keeping policies super easy for as long as necessary to raise inflation.
“The next week is relatively weak on the international data agenda, but after the recent increase in long bond yields, hearings for Fed President Powell in both chambers of Congress (Tuesday / Wednesday) will attract great interest,” he said. Elisabet Kopelman, US economist at SEB.
“The fact that the most recent increase in yields on long bonds was driven by higher real interest rates and not just inflation expectations increases the likelihood of a dovish message.”
European Central Bank President Christine Lagarde is also expected to sound peaceful in a speech on Monday.
Yields on 10-year Treasury notes have already reached 1.38%, breaking the 1.30% level and taking the year-to-date hike up to steep 43 basis points.
BofA analysts note that 30-year bonds have returned -9.4% in the year so far, the worst start since 2013.
“Real assets are outpacing financial assets by 21, as cyclical, political and secular trends indicate higher inflation,” said analysts in a note. “Rising goods, energy laggards in vogue, materials in secular leaks.”
Previously in Asia, the broader MSCI Asia-Pacific stock index outside Japan fell 1.18% after falling from a record high last week as the jump in US bond yields unsettled investors .
Japan’s Nikkei recovered 0.8% and South Korea 0.1%, but Chinese blue chips lost 1.4%.
A RECOVERY WITH COPPER PLATE One of the stars has been copper, a key component of renewable technology, which increased 7.7% last week to a nine-year peak. The broader base metals index LMEX rose 5.5% in the week.
Oil prices followed the rise, helped by tightening supplies and freezing weather, giving Brent gains of 22% so far this year.
On Monday, Brent oil futures rose 0.7% to $ 63.33 a barrel. US crude oil added 0.7% to $ 59.65.
All of this has been a blessing for commodity-linked currencies, with Canadian, Australian and New Zealand dollars on the rise in the year so far.
The pound sterling peaked at $ 1.4050 in three years, with the help of one of the fastest vaccine implementations in the world. England will ease blocking restrictions at five-week intervals, Sky News reported on Monday, hours before Prime Minister Boris Johnson announced details of his roadmap for the country’s reopening.
The US dollar index has been relatively limited, with downward pressure on the country’s expanding twin deficits balanced by higher bond yields. The last index stood at 90,342, not far from where the year started at 90,260.
The increase in Treasury yields helped the dollar to gain against the yen to 105.60, as the Bank of Japan is actively restricting income at home.
The euro was stable at $ 1.2135, trapped between support at $ 1.2021 and resistance around $ 1.2169.
One commodity that is not doing so well is gold, partly because of rising bond yields and partly because investors question whether cryptocurrencies can be better protection against inflation.
Gold was at $ 1,795 an ounce, having started the year at $ 1,896. Bitcoin fell 5.8% on Monday at $ 54,127, out of a record $ 58,354.
Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney; edition by Larry King