GLOBAL MARKETS-Stocks gain, commodities rise on inflation worries

  • Reuters
  • Stock Market News
GLOBAL MARKETS-Stocks gain, commodities rise on inflation worries
Credit: © Reuters.

(Adds close of European markets)

* Pharmas fall after U.S. backs waiving IP on COVID vaccines

* Euro zone retail sales beat expectations

* Gold gains, oil and dollar ease

* Global asset performance

* World FX rates

By Herbert Lash

NEW YORK, May 6 (Reuters) - The dollar fell and a gauge of global equity markets edged higher on Thursday as surging commodity prices spurred the prospect of rising inflation and led investors into economically sensitive stocks on the reflation trade.

Aluminum prices approached levels last seen in 2018 and copper CMCU3 prices flirted with 10-year peaks. Gold jumped more than 1% as the weaker dollar and easing Treasury yields propelled the precious metal, an inflation hedge, above the key $1,800 an ounce psychological level.

Treasury yields moved in a narrow range as investors largely shrugged off better-than-expected initial U.S. jobless claims data and waited for Friday's April non-farm payrolls report for market direction.

Investors fear inflation may be more prolonged than the messaging from the Federal Reserve, which has said rising consumer prices will be temporary, said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

"The spike in commodity prices in particular, the shortage of semiconductors and shipping resources, for example, is worrying the market," Ghriskey said. "It's a value day or cyclical day in the (equity) market."

MSCI's benchmark for global equity markets .MIWD00000PUS , which tracks stocks in 50 countries, rose 0.31% to 701.81. The pan-European STOXX 600 index .STOXX closed 0.1% lower.

On Wall Street, the Dow Jones Industrial Average .DJI rose 0.43%, the S&P 500 .SPX gained 0.23% and the Nasdaq Composite .IXIC dropped 0.2%.

The healthcare sector took a hit as vaccine makers fell after President Joe Biden backed plans for patent waivers on COVID-19 shots, but losses were capped by the upbeat jobless claims report.

Shares in Pfizer Inc (NYSE: PFE ) PFE.N , Moderna Inc MRNA.O , Johnson & Johnson (NYSE: JNJ ) JNJ.N and Novavax Inc NVAX.O , all involved in the making of COVID-19 vaccines, fell between 1.0% and almost 2%.

Asia, Japan's Nikkei .N225 jumped 1.8% as it reopened after a five-day holiday. Chinese shares also resumed trade for the first time since last week and wobbled as the CSI300 .CSI300 fell 1.2%, led by falls in biotech firms.

The Canadian dollar hit a three-and-a-half year high versus the greenback, helped by oil price gains and the Bank of Canada's recent shift to more hawkish guidance CAD=D3 . Australian dollar fell sharply overnight when China said it would stop its economic dialogue with Australia, but the currency later recovered to trade about 0.3% higher AUD=D3 . Treasuries yield curve flattened for a fifth session, as yields on the long end stalled amid increased investor demand and as the Federal Reserve repeatedly affirmed its dovish stance. The spread between U.S. 2-year and 10-year yields slid to 140.8 basis points US2US10=TWEB .

"We're stuck in a battle," said Ellis Phifer, managing director in fixed income research at Raymond (NS: RYMD ) James in Memphis, Tennessee. "The growth story is leading to inflation, while the Federal Reserve is jawboning, trying to keep expectations down, which I think is the right thing to do."

U.S. yields briefly inched higher after data showed initial claims for state unemployment benefits totaled a seasonally adjusted 498,000 for the week ended May 1, compared to 590,000 in the prior week.

The dollar index =USD fell 0.301%, with the euro EUR= up 0.37% to $1.205.

The Japanese yen strengthened 0.09% versus the greenback at 109.10 per dollar.

Investors drew comfort from the latest economic data and forecasts in Europe, which pointed to a recovery still on track.

Retail sales in the euro zone beat expectations with a 2.7% rise in March as curbs on shoppers eased.

The Bank of England increased its forecast for Britain's economic growth this year after its coronavirus slump. prices gave up initial gains despite crude stockpiles in the United States, the world's largest oil consumer, falling more sharply than expected.

Brent crude futures LCOc1 fell $0.50 to $68.46 a barrel. U.S. crude futures CLc1 slid $0.55 to $65.08 a barrel.

The number of Americans filing new claims for unemployment benefits fell below 500,000 last week for the first since the COVID-19 pandemic started more than a year ago, signaling the U.S. labor market recovery has entered a new phase amid a booming economy. U.S. monthly jobs report is expected to show non farm payrolls increased by 978,000 jobs last month and confirm the economy's solid path to recovery.

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