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GLOBAL MARKETS-Stocks slide again on rising bond yield pressure

Published 2018-01-30, 04:32 p/m
GLOBAL MARKETS-Stocks slide again on rising bond yield pressure

(Adds close of U.S. markets)

* MSCI world stocks index in biggest two-day selloff in 16 months

* Dollar reverses gains as Fed starts two-day meeting

* Oil falls on evidence of increased U.S. output

By Herbert Lash

NEW YORK, Jan 30 (Reuters) - World stocks declined in their biggest two-day dive in 16 months on Tuesday as tumbling oil prices and a jump in global borrowing costs cooled the year's euphoric start in financial markets.

Lackluster German inflation curbed a rise in U.S. Treasury yields - the benchmark for world lending rates - after they touched their strongest level in nearly four years overnight at 2.733 percent. on Wall Street shed about 1 percent, led by a plunge in healthcare-related companies after Amazon.com AMZN.O , Berkshire Hathaway (NYSE:BRKa) BRKa.N and JPMorgan (NYSE:JPM) JPM.N said they plan to form a venture to cut healthcare costs for their U.S. employees. .SPXHC tumbled 2.13 percent, the biggest decline among the 11 major S&P 500 sectors.

Health insurer UnitedHealth UNH.N and drugmaker Pfizer PFE (NYSE:PFE).N were among the top five decliners in the S&P 500, falling 4.35 percent and 3.13 percent, respectively.

Pfizer had gained about 2 percent in pre-market trading after the company's quarterly results and full-year forecasts beat expectations. were also pulled lower by a decline in energy shares amid ongoing evidence of rising U.S. crude output. S&P energy sector .SPNY fell 2.0 percent.

Investors were spooked by the first two-day decline on Wall Street so far this year, which prompted a flight to the safety of U.S. government bonds, said Gennadiy Goldberg, interest rates strategist at TD Securities in New York.

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Investors awaited President Donald Trump's first State of the Union address to Congress Tuesday night, a Federal Reserve statement on Wednesday and a jobs report on Friday that serves as a key barometer of the U.S. economy.

The Fed will be watched for comments that could quicken the pace of expected interest rate hikes this year as the inflation outlook has firmed in recent readings.

"Investors are getting a bit worried about inflation, which has led some people to believe that the Fed might be more aggressive when it comes to raising rates," said Robert Pavlik, chief investment strategist at SlateStone Wealth.

"Despite this selloff, all indications point to a firming economy and I do expect to see some bargain hunters step in soon," Pavlik said.

It was largest two-day decline for both the Dow and MSCI's gauge of worldwide stock performance since September 2016. The S&P 500 is still up 5.5 percent in January.

On Wall Street, the Dow Jones Industrial Average .DJI fell 362.59 points, or 1.37 percent, to 26,076.89. The S&P 500 .SPX lost 31.1 points, or 1.09 percent, to 2,822.43 and the Nasdaq Composite .IXIC dropped 64.02 points, or 0.86 percent, to 7,402.48.

The pan-European FTSEurofirst 300 index .FTEU3 closed down 0.83 percent and MSCI's all-country world stock index .MIWD00000PUS shed 0.99 percent. MSCI's emerging markets index .MSCIEF fell 1.6 percent.

Benchmark 10-year U.S. Treasury notes US10YT=RR fell 5/32 in price to yield 2.7199 percent. 10-year bond DE10YT=RR fell to 0.68 percent, down about 1 basis point on the day. After going positive for the first time since late 2015 on Monday, five-year German bond DE5YT=RR yields slipped back into negative territory. dollar reversed Monday's gains. After six straight weekly declines, the dollar index was on track to fall about 3.4 percent for the month, which would be its biggest monthly fall since March 2016.

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The dollar index .DXY fell 0.12 percent, with the euro EUR= up 0.14 percent to $1.2398. The Japanese yen JPY= strengthened 0.17 percent versus the greenback at 108.80 per dollar. crude futures LCOc1 settled down 44 cents to $69.02 a barrel, while West Texas Intermediate futures CLc1 slid $1.06 to settle at $64.50. for U.S. crude inventories USOILC=ECI to rise for the first time in 11 weeks may also be keeping oil under pressure, according to a preliminary poll by Reuters on Monday. global trend seems to be indicating more oil is coming into the market despite best efforts by the Saudis and Russians to curtail output," said John Kilduff, partner at Again Capital LLC in New York.

Gold slipped back to a one-week low.

U.S. gold futures GCcv1 for February delivery settled down $4.90 at $1,335.40 per ounce. GRAPHIC-Global market cap

http://reut.rs/2mcp7T1 GRAPHIC-Global assets in 2018

http://tmsnrt.rs/2jvdmXl GRAPHIC-Emerging markets in 2018

http://tmsnrt.rs/2ihRugV GRAPHIC-World FX rates in 2018

http://tmsnrt.rs/2egbfVh

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