GLOBAL MARKETS-Shares pause, awaiting next move in bonds

By Huw Jones
LONDON, March 2 (Reuters) - European shares paused on
Tuesday as investors sought to guess the bond market's next
move, while weak German retail sales were a stark reminder of
continued COVID-19 fallout on the region's biggest economy.
Overnight falls in Asian stockmarkets, after a senior
Chinese official expressed wariness about the risk of asset
bubbles in foreign markets, and a drop in oil prices also
weighed on sentiment, but the dollar was steady, along with U.S.
Treasuries.
Analysts said a pause was to be expected after European
shares had marked their best day in nearly four months on Monday
when bond markets stabilized from a sharp selloff last week.
"We are in the yield waiting room to see whether central
bankers push back this week on the ambivalence we saw last week
about interest rates," said Michael Hewson, chief market analyst
at CMC Markets.
"Potentially that was a mistake, giving the impression that
the U.S. did not really care about sharp rises in yields and
sending the wrong message."
The pan-European STOXX 600 share index .STOXX edged 0.2%
higher, with Paris .FCHI down, while Frankfurt .GDAXI and
London .FCHI eked out slim gains.
Investors will scrutinise speeches from U.S. Federal Reserve
officials, starting with Lael Brainard at 1800 GMT on Tuesday,
for any tweaks to messages on bond yields.
European Central Bank vice president Luis de Guindos said
the ECB has the flexibility to counter any undesired rise in
bond yields, helping to soothe the German bund in early trading.
"We will have to see whether this increase in nominal yields
will have a negative impact on financing conditions," de Guindos
told Portuguese newspaper Público in comments published on
Tuesday.
Among the day's economic data, German retail sales tumbled
more than expected in January as an ongoing lockdown to fight
the coronavirus pandemic curtailed retail spending.
U.S. stock futures were weaker 1YMcv1 EScv1 NQcv1 .

CHINA BUBBLE WARNING
Shares in mainland China and Hong Kong fell after a top
regulatory official expressed concerns about the risk of bubbles
bursting in foreign markets. "Financial markets are trading at high levels in Europe, the
U.S. and other developed countries, which runs counter to the
real economy," Guo Shuqing, head of the China Banking and
Insurance Regulatory Commission, told a news conference.
Chinese blue-chips .CSI300 slipped 1.3% while Hong Kong's
Hang Seng Index .HSI lost 1.2%.
MSCI's broadest index of Asia-Pacific shares outside Japan
slipped 0.33%. Japan's Nikkei .N225 was down 0.8% as some
investors booked profits on defensive energy and utility shares
before the end of the fiscal year this month. U.S. stocks .N rallied overnight, with the S&P 500 .SPX
posting its best day in nearly nine months, as bond markets
calmed after a month-long selloff.
U.S. stocks were roiled last week when a selloff in
Treasuries pushed the 10-year Treasury yield US10YT=RR to a
one-year high of 1.614%. The 10-year yield was flat at 1.4308%.
US/
Bitcoin BTC=BTSP fell 1% to $49,135 after rising nearly 7%
on Monday.
The U.S. dollar index =USD was up 0.3% against a basket of
currencies to stand at 91.32. USD/
A stronger greenback weighed on gold XAU= , with the yellow
metal at $1,719.74 an ounce, down 0.2%. GOL/
Oil prices slid on expectations that OPEC would agree to
raise oil supply at a meeting this week. Brent crude LCOc1
dropped 68 cents, or 1.05%, to $63.01 a barrel. U.S. West Texas
Intermediate (WTI) crude CLc1 fell 58 cents, or 0.9%, to
$60.05 a barrel.

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