Shares wary on U.S. inflation, battered bitcoin charts recovery

LONDON (Reuters) – Stocks struggled for momentum on Monday as investors awaited key U.S. inflation readings for guidance on monetary policy, while bitcoin rebounded from its hammering on news of China’s clampdown on mining and trading of cryptocurrencies.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 21, 2021. REUTERS/Staff

European stocks were 0.1% weaker, hovering below record highs scaled earlier this month, as gains fizzled out from Friday’s data showing accelerating business growth in Britain and the euro zone for April.

European Central Bank President Christine Lagarde’s assertion on Friday that it was still too early to discuss winding down the bank’s 1.85 trillion euro emergency bond purchase scheme kept euro zone bond yields steady.

Markets in Austria, Denmark, Hungary, Norway, Switzerland and Germany were closed for a holiday.

“We continue to struggle to see any upside for the ECB to reduce purchases meaningfully and risk an unwanted tightening of financing conditions,” Citi analysts said in a note Monday.

The MSCI world equity index was flat.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.1% in slow trade. Japan’s Nikkei added 0.2% and Chinese blue chips 0.4%.

Nasdaq futures rose 0.6% and S&P 500 futures firmed 0.4%.

Sovereign dollar bonds issued by Belarus tumbled 3 cents after Belarusian authorities on Sunday forced an airliner to land and arrested an opposition-minded journalist who was on board, drawing condemnation from Europe and the United States.


After the strong growth shown by Friday’s surveys of the global services sectors, all eyes will be on U.S. personal consumption and inflation figures this week.

A high core inflation reading would ring alarm bells and could revive talk of an early tapering by the U.S. Federal Reserve.

The diary has a crowd of Fed speakers this week, including influential Fed Board Governor Lael Brainard, and markets will be keen to hear if they stick to the script on being patient with policy.

BofA’s monthly Fund Manager survey found a record 69% of respondents expected above-trend economic growth and inflation globally.

As a result, managers had pushed into commodities and late-cyclicals, where overweight positions were close to 15-year highs, while the single most crowded trade was Bitcoin.

“With such bullish views on growth and inflation, the risk for investors is that growth slows and inflation proves temporary,” BofA analysts said in a note. “Also, Tech, viewed as crowded fairly recently, is now back to an underweight and would likely benefit if inflation fears ebbed.”


After shedding 13% on Sunday, bitcoin was up 7% on Monday at $37,128 – but still more than 40% off its all-time high.

It was hurt in part by China’s crackdown on mining and trading of the largest cryptocurrency as part of ongoing efforts to prevent speculative and financial risks.

The major currencies were staid in comparison, with the euro at $1.2206 after repeatedly failing to clear chart resistance around $1.2244 last week.

The dollar was idling on the yen at 108.95 , pinned between support at 108.56 and resistance around 109.33. Against a basket of currencies, the dollar had steadied at 89.945 after hitting its lowest since February at 89.646 on Friday.

In bond markets, Friday’s dovish comments from Lagarde kept borrowing costs below recent multi-month highs.

Germany’s benchmark 10-year bond yield was a touch lower at -0.13%, around six basis points below two-year highs hit last week.

U.S. Treasury yields eased. Benchmark 10-year notes were at 1.6182%, below Friday’s close of 1.6320%.

The softness of the dollar combined with concerns about inflation and the wild volatility of cryptocurrencies helped support gold. The metal was last at $1,880 an ounce, after reaching its highest since January.

“The recent mix of strong U.S. CPI, weak employment, and Fed policymakers willing to let inflation overshoot while targeting the employment gap, could remain gold-bullish for a while longer,” said Michael Hsueh, commodities & FX strategist at Deutsche Bank.

Oil prices edged higher as Iran and the U.N. nuclear watchdog extended a recently expired monitoring agreement by a month, averting a collapse that could have pitched wider talks on reviving the 2015 Iran nuclear deal into crisis.

Brent was last up 1.6% at $67.50 a barrel, while U.S. crude added 1.6% to $64.60 per barrel.

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