* 10-year yield in the U.S. hits its 13-month high
* Little changed gold, bitcoin drop
* Oil fell after two strong weekly gains (price updates, comments)
NEW YORK, March 12 (Reuters) – A worldwide stock index fell on Friday, but has been set to post its strongest weekly gain in five, while benchmark Treasury yields have soared to 13-month highs , partly due to optimism after a $ 1.9 trillion package recovery was signed into law.
Gains in the Shanghai and Tokyo stock markets proved difficult to match in Europe and Wall Street, where banks were the linchpin of hope and Nasdaq underperformed as the rotation of growth towards value continued. Dow Industrials reached a record high.
The rise in Treasury yields supported the dollar, while the liquidation of the shares illuminated the dollar’s safe haven appeal.
In a scenario of super loose monetary policy, some analysts expect inflation to rise as the launch of vaccines leads to the reopening of economies, raising fears that the stimulus package could overheat the American economy.
The President of the United States, Joe Biden, signed the stimulus legislation before giving a televised speech on Thursday night, in which he promised aggressive action to speed up vaccinations and bring the country closer to normal by 4 July.
“We are back to the idea that more growth is more inflation and investors are a little nervous about the current levels of yield that are affecting technology stocks,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments in Houston .
“It’s all about the pace at which yields are growing and the market appears to be comfortable with another 10-20 basis point jump in benchmark yield if supported by solid data showing an economic recovery.”
The Dow Jones Industrial Average rose 233.39 points, or 0.72%, to 32,718.98, the S&P 500 lost 3.36 points, or 0.09%, to 3,935.98 and the Nasdaq Composite fell 111.26 points , or 0.83%, to 13,287.42.
The pan-European index STOXX 600 lost 0.26% and the stock indicator for MSCI worldwide fell 0.17%.
Emerging market stocks lost 0.76%. Overnight, the broader MSCI Asia-Pacific stock index outside Japan closed down 0.69%, while Japan’s Nikkei rose 1.73%.
U.S. 10-year Treasury yields rose above 1.6% and were on track to record their seventh consecutive weekly increase.
“The rate bias is even higher, except for an unforeseen setback in vaccines or an explicit Fed action,” said Gregory Faranello, head of US rates at AmeriVet Securities in New York.
US producer prices recorded the biggest annual gain in February in almost two and a half years, but still high unemployment can make it more difficult for companies to pass on the higher costs to consumers.
The 10-year benchmark notes fell 30/32 in price to yield 1.6317%, from 1.527% on Thursday night.
Recent and sharp movements in the market place even more importance on the US Federal Reserve meeting next week looking for clues about its views on rising yields and the threat of inflation.
In the foreign exchange market, the dollar index rose 0.244%, with the euro decreasing 0.28%, to US $ 1.1951.
The Japanese yen weakened 0.51% against the US dollar to 109.04 per dollar, while the British pound was trading at $ 1.3923, down 0.48% on the day.
Markets are expected to remain volatile in the second quarter, especially for the dollar, which was much stronger than expected earlier this year, said Cliff Zhao, chief strategist at China Construction Bank International.
“The strong dollar may weigh on some liquidity conditions in emerging markets,” he said.
The Institute of International Finance on Thursday asked the Fed to provide guidance on how to manage higher yields to prevent further exits from emerging markets.
Oil prices have plummeted, with Brent and WTI struggling to maintain weekly performance in positive territory, after rising more than 10% in the past two weeks.
On Friday, U.S. crude oil fell 0.53% to $ 65.67 a barrel, and Brent was at $ 69.22, down 0.59% on the day.
Spot gold added 0.1% to $ 1,722.56 an ounce. Silver fell 0.79% to $ 25.87.
Bitcoin fell 1.43% for the last time, to $ 56,947.33.
Reporting by Rodrigo Campos; additional reporting by Shashank Nayar and Medha Singh in Bengaluru, John McCrank and Gertrude Chavez-Dreyfuss in New York and Shadia Nasralla in London Editing by Nick Zieminski