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GLOBAL MARKETS-Risk appetite falls on weak oil and bonds, tightening tension

Published 2017-07-07, 04:09 a/m
© Reuters.  GLOBAL MARKETS-Risk appetite falls on weak oil and bonds, tightening tension
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By Vikram Subhedar

LONDON, July 7 (Reuters) - World stocks are poised to end the week at six-week lows in the face of oil weakness, a spike in bond yields and anticipation of tighter monetary policy, particularly in the United States.

U.S. monthly payrolls data is due on Friday and economists polled by Reuters expect U.S. employers to have added 179,000 jobs in June, above May's gain of 138,000.

Investors are focused on wage growth and whether spending by U.S. consumers will be strong enough to back the U.S. Federal Reserve's intention to further tighten policy.

Bets that the world's major central banks are moving closer to unwinding ultra-loose monetary policies have roiled markets and European Central Bank minutes released on Wednesday indicate its policymakers are open to further steps.

This sent German government bond yields to 18-month highs, lifted the euro EUR= and weighed on stocks.

"Once again, bond markets are ruling FX and having an increasing impact on equity markets," strategists at Morgan Stanley (NYSE:MS), led by Hans Redeker, said, drawing parallels with moves seen in 2013 during the so-called "taper tantrum," when Fed signals about withdrawing liquidity hit markets. gauge of global stocks .MIWO00000PUS was at its lowest since late May's record highs and down 0.6 percent for the week.

The dollar rose against a basket of major currencies .DXY and hit a seven-week high against the yen after the Bank of Japan increased its government bond buying, expanding monetary policy when other central banks are moving towards tightening.

The BOJ said it would purchase an unlimited amount of bonds, as it sought to put a lid on domestic interest rates pushed higher by the broad sell-off in developed market bonds.

In commodity markets, Brent crude futures LCOc1 , the international benchmark for oil prices, were trading down 1.2 percent, at $47.55 per barrel.

Oil prices are down more than 16 percent this year, muddying the outlook for inflation expectations globally.

Weakness in crude prices also hurt the commodity-heavy UK bluechip index .FTSE which continues to lag its regional and global peers.

(Editing by Alexander Smith)

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