Lending markets

GLOBAL MARKETS-Equity gains capped by rising real yields, Netflix disappoints

* Actual yields are flirting with positive territory

* Oil is trading above $100 a barrel

* The dollar hits a new two-decade high against the yen

* US stock futures fall after Netflix

By Huw Jones

LONDON, April 20 (Reuters) – Shares edged higher on Wednesday but gains were capped by questions about the extent of the rise in real bond yields as investors scrutinize disappointing Netflix results and the war continues in Ukraine.

The STOXX index of 600 European companies gained 0.4% to 458.17 points. The MSCI All-Country Stock Index rose 0.2%.

Investors kept a cautious eye on 10-year Treasury inflation-protected securities (TIPS), whose yields briefly broke above negative territory on Tuesday for the first time since March 2020.

A rise in real yields poses a new headwind for risky assets such as stocks, especially big tech companies which report earnings next week, now under closer scrutiny after Netflix shares sank on Tuesday night following the announcement the loss of subscribers.

Tech-heavy Nasdaq futures fell 0.6%, with S&P500 futures losing 0.3%

“You’re going to have to see real yields in much more positive territory before they make equity markets less attractive,” said Michael Hewson, chief market analyst at CMC Markets.

“The biggest question the markets are struggling with right now is has inflation peaked? If inflation has peaked, then maybe it’s a good time to buy stocks again. bonds, which is why we see so much uncertainty about the future direction of the stock markets,” Hewson said.

The dollar hit a new two-decade high against the yen, supported by the Bank of Japan’s return to the market to defend its ultra-low interest rate policy.

Data is starting to emerge from the International Monetary Fund this week on the impact of the two-month war in Ukraine on the global economy.

The US Federal Reserve on Wednesday releases its “Beige Book” of economic conditions from late February to early April. “We expect the pace of economic activity to slow slightly to a modest pace,” UniCredit analysts said in a note.

In Europe, German producer prices hit a record high amid the war in Ukraine.

In an election that rocked French bonds, President Emmanuel Macron and far-right candidate Marine Le Pen will face off in a televised debate on Wednesday evening. Macron, however, appears to be ahead of Le Pen in the polls ahead of Sunday’s final round of elections.

INCREASE IN ACTIONS IN ASIA

MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 0.3%, its first positive session in a week.

The Japanese Nikkei rose 0.8%, along with other markets in the region, following Tuesday’s gains on Wall Street, where the three major benchmarks saw their best days in more than a month, helped by several strong earnings results. The Nasdaq closed up 2.2%.

China bucked the regional trend as Chinese blue chips fell 1.5% after the central bank kept benchmark lending rates unchanged, despite frequent government pledges to support a slowing economy hit by the crisis. worst COVID-19 outbreak in two years.

The move, on the other hand, helped the Chinese yuan rally after hitting its lowest level since October at the start of trading.

“Investors were looking for stimulus from China but the PBOC failed to deliver today,” Carlos Casanova said. “Markets will inevitably interpret this negatively with the lockdowns extending into April and beyond, meaning the worst months for economic data are ahead of us.”

The yield on a heavily traded Chinese 10-year government bond contract fell below the US 10-year Treasury yield for the first time since 2010 earlier this month, and Chinese 10-year yields were last around 2.85%.

Benchmark 10-year Treasury yields were a hair’s breadth from 3% on Wednesday – although they were little changed on the day.

Yield differentials are also a factor for Japan, where the central bank on Wednesday offered to buy an unlimited amount of 10-year Japanese government bonds (JGBs) at 0.25%, in its third move since February. to defend its performance objective.

That yield curve control sent the yen to a 20-year low against the dollar, but the dollar fell 0.2% against the yen on Wednesday amid some nerves that intervention – verbal or otherwise. – Japanese authorities could cause a rebound.

Oil prices rebounded from steep losses in the previous session as concerns over tight supplies from Russia and Libya dominated.

Brent crude futures rose 1.2% to $108.55 a barrel.

Spot gold fell 0.4% to its lowest level in a week, led by higher yields.

(Reporting by Huw Jones in London, Tom Westbrook in Singapore and Alun John in Hong Kong; Editing by Himani Sarkar and Kim Coghill)