Markets tap brakes on asset rise after getting ahead of recovery

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(Reuters) – Stocks were flat in early trading in Asia on Thursday as investors kept tapping the brakes on runs in asset prices after taking in tepid U.S. inflation data and comments from the Federal Reserve chief affirming the outlook for a slow recovery.

The Australian S&P/ASX 200 Index was last up 0.02% while e-mini futures for the S&P 500 edged up 0.05%.

“Some of the steam has run out of the engine over the last couple of trading sessions,” said Jarrod Kerr, chief economist at Kiwibank.

“We’ve had a good run, but the data hasn’t kept up,” said Kerr, predicting that bond yields and stocks will still end the year higher after a pause in the reflation trade.

The pause coincides with much of Asia going into extended holidays for the Lunar New Year.

On Wednesday, markets around the globe saw choppy trading and mild moves in most asset prices, with the exception of U.S. Treasuries where yields tumbled after data showed inflation stayed benign in January, disappointing investors betting on increasing price pressures.

The yield on benchmark 10-year Treasuries slid to 1.135% after rising to 1.176%. On Monday the yield had reached 1.2%, an 11-month high.

The move was reinforced when Federal Reserve Chair Jerome Powell, who has pledged to keep interest rates low, said the U.S. labor market still was “a long way” from full employment.

Wall Street stocks shrugged off Powell’s comments. Major indexes were little changed, though the Dow Jones Industrial Average snared a 0.2% gain to a record close of 31,437.80 The S&P 500 slipped 0.03% and the Nasdaq Composite lost 0.25% from a record close the day before.

Within the indexes, there was further rotation of money from some big tech stocks toward energy shares, financial stocks, broadening the market leadership.

European shares also closed lower on Wednesday, with pan-European STOXX 600 index finished 0.2% in the red.

The dollar index drifted 0.2% lower after the tame U.S. inflation data, posting its third down day on losses against sterling and euro.[FRX/] Cryptocurrency bitcoin was down more than 3% to $45,140.10 at 23:27 GMT.

On Tuesday, bitcoin had hit $48,216 following Tesla (NASDAQ:TSLA)’s disclosure of a $1.5 billion investment in the virtual currency. [vnL1N2KF0L8]

U.S. crude fell early on Thursday by 0.36% to $58.47 per barrel and Brent was at $61.10, up 0.02%.

On Wednesday, oil rose for ninth day, its longest winning streak in two years, supported by producer supply cuts and hopes vaccine rollouts will boost demand.

Some remained cautious about crude’s rally. “The current price levels are healthier than the actual market and entirely reliant on supply cuts, as demand still needs to recover,” said Bjornar Tonhaugen of Rystad Energy.

Commodity traders will also watch platinum, which jumped over 5% on Wednesday and raced to a six-year peak on the outlook for demand from the automobile sector.

Platinum edged down 0.3% in early trading on Thursday and was last at $1,239.8.

Spot gold was last up 0.1% to $1,843.23. U.S. gold futures settled up 0.3% on Wednesday.

“Gold’s in a bit of tug of war,” said ED&F Man Capital Markets analyst Edward Meir. While the weaker dollar is bullish, expectations for a big U.S. stimulus package point toward higher interest rates which may holding gold less attractive, he said.

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