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Treasury yields rise, U.S. stocks hit new highs; dollar weakens

Treasury yields extended their rise on Friday while the three major U.S. stock indexes rallied to record closing highs, as markets relaxed a bit from fears of a slowing pace of economic recovery from COVID-19 that dominated trading for much of the week.

Concern about a faltering recovery, driven in part by the spread of the Delta variant of the coronavirus, had reduced risk appetite early in the week and prompted flight-to-safety bond buying, with some betting the reflation trade had stalled.

· That action helped push 10-year U.S. government bond yields to a 4-1/2 month low on Thursday. Data released on Friday showed investors through July 6 were reducing short bond positions, which also weighed on yields.

Still, the yield on 10-year Treasury notes rose 7.7 basis points to 1.365% on Friday.

· Gold set for weekly gain as Delta variant threat looms

Gold rose on Friday, heading for its best week in seven, bolstered by a weaker dollar and concerns that the spread of the Delta variant of the coronavirus could slow a global economic recovery.

· Spot gold rose 0.5% to $1,810.99 per ounce by 2:44 p.m., and was up 1.4% for the week.

· U.S. gold futures settled 0.6% higher at $1,810.6.

· “We do continue to have issues with the Delta variant. That may very well slow economic progress, not only in the United States, but of course around the world,” said Bart Melek, head of commodity strategies at TD Securities.

“As investors get convinced that the U.S Federal Reserve indeed is targeting full employment and that it’s not particularly worried about inflation moving above targets for a period, we could see gold’s move over $1,850 by year-end.”

· Gold, a hedge against economic and political uncertainties and also rising inflation, attracted buyers as vaccination shortfalls and highly contagious coronavirus variants prompted fresh restrictions, especially in Southeast Asia.

· A softer dollar also added to bullion’s lustre by making it cheaper for investors holding other currencies.

But capping gains, benchmark U.S. 10-year Treasury yields rose from a more than four-month low, translating into higher opportunity cost for holding non-yielding bullion.

· In the physical markets, gold demand in India and China slowed this week, dampened by higher domestic rates.

· Meanwhile, a British regulator said banks clearing gold trades in top hub London could apply for an exemption from tighter capital rules due in January, removing what some said was a threat to the functioning of the market.

· Silver rose 0.9% to $26.15 per ounce but was down for the week after rising over the previous fortnight.

· Platinum gained 2.5% at $1,102.53 and palladium rose 0.2% to $2,811.90, with both metals headed for a weekly gain.

· In currencies, the safe-haven yen weakened 0.32% versus the greenback at 110.14 per dollar, while the dollar index fell 0.205%, and the euro edged up 0.24% to $1.1871.

· Dollar edges lower as risk appetite returns

The dollar index slid 0.252% to 92.131.

Signs of risk relief were tempered, however, as spot gold , another safe-haven asset, logged its third straight weekly gain, rising 0.3% to $1,807.65 an ounce.

· Stocks rose as financials and other economically focused sectors rallied from the selloff sparked by growth worries earlier in the week.

· Dow jumps 440 points to record, rebounding from one-day slide

· Investors will next gauge risk appetite by assessing results of auctions of $38 billion of 10-year Treasury notes on Monday, and $24 billion of 30-year bonds on Tuesday.

· "If auction demand is a little bit squishy, especially at the 10-year sale, then we could see 1.45% in a hurry," LeBas said, referring to the effect on the 10-year Treasury yield if investors resume selling.

· Concerns remain that vaccination alone won't squelch the virus enough to get economies back to normal.

Aligned against such fears: loose monetary policy from major central banks. But that support may vanish if inflation spikes.

· Oil prices rise over 2% as U.S. inventories decline

Oil prices rose for a second day on Friday as the market reacted to falling U.S. inventories, and signs of strong Asian demand from both China and India added support.

Brent crude oil futures were up $1.43, 1.93%, at $75.55. U.S. West Texas Intermediate futures were up $1.62, or 2.2%, at $74.56.

· Fed says shortages of materials, hiring problems holding back recovery

Shortages of materials and "difficulties in hiring" are holding back the U.S. economic recovery from the coronavirus pandemic and have driven a "transitory" bout of inflation, the Federal Reserve said on Friday.

· Fed's Quarles seeks global coordination on climate-related financial risk

Global financial regulators need a joint effort to address climate-related financial risks, the chair of the Financial Stability Board said on Sunday, urging the body tasked with setting disclosure standards to “press forward as quickly as possible.”

Randal Quarles, who is also the Federal Reserve’s Vice Chair for Supervision, also called for an international effort to develop comprehensive and comparable data on climate-related risks, including better information on the dangers of extreme weather events to business, bank and household balance sheets

· Delta Covid variant worries outweigh Fed taper concerns: Charles Schwab

Jeffrey Kleintop from Charles Schwab says markets currently reflect investors’ concern about the spread of the coronavirus Delta variant more than the Federal Reserve’s tapering plans, but sees U.S. Treasury yields clawing back higher by the end of the year.

· ECB debated reducing stimulus in June meeting: accounts

European Central Bank policymakers debated a cut in stimulus at their June 10 meeting as the recovery picked up pace but eventually found "broad agreement" to maintain an elevated level of support, the accounts of the meeting showed on Friday.

· Too soon to scale back ‘emergency’ pandemic bond buying, ECB’s Visco says

Despite gradually recovering economies and summer tourism reopening in many parts of the euro zone, it’s not time to end emergency stimulus measures yet, Italian Central Bank Governor Ignazio Visco told CNBC at the G-20 on Sunday.

“This is an emergency program that had to do with the effects of the pandemic,” Visco, who is also a member of the European Central Bank’s Governing Council, told CNBC’s Annette Weisbach in Venice, Italy.

· ECB's Schnabel says she doesn't expect 'excessively high' inflation

Inflation in the euro zone is unlikely to overshoot and the current increase in price growth driven by the coronavirus pandemic will be temporary, European Central Bank board member Isabel Schnabel was quoted on Saturday as saying.

"I am sure that we will not experience any excessively high inflation," Schnabel told the Frankfurter Allgemeine Sonntagszeitung in extracts from an interview released ahead of publication.

· Biden and Merkel to discuss Afghanistan, cybersecurity and Nord Stream pipeline this week

President Joe Biden will host German Chancellor Angela Merkel in the week ahead at the White House.

The two leaders are expected to share their concerns on the deteriorating security situation in Afghanistan, the steady drumbeat of cyberattacks and long-standing trade issues.

Merkel’s July 15 visit to the White House marks the third time a foreign leader has met with Biden in Washington since he became president.

· Virus variants threaten global recovery, G20 warns

An upsurge in new coronavirus variants and poor access to vaccines in developing countries threaten the global economic recovery, finance ministers of the world's 20 largest economies warned on Saturday.

· We should avoid imposing new COVID-19 restrictions - G20 presidency

Italy’s economy minister Daniele Franco said virus variants were a major source of concern for the global economy but he added that the world should avoid imposing new restrictions on people’s lives to combat the pandemic.

“We all agree we should avoid introducing again any restriction on the movement of citizens and the way of life of people,” Franco told a news conference at the end of a meeting of G20 finance ministers and central bank governors in Venice.

· G-20 financial leaders agree to move forward on plan for an international tax crackdown

· Germany's Scholz sees final tax reform deal by October

· Janet Yellen says tax changes for large firms may not be ready until 2022

· U.S. Treasury's Yellen to push development banks to step up climate financing effort

· China condemns 'unreasonable suppression' as U.S. expands economic blacklist

China said on Sunday it "resolutely opposes" the addition of 23 Chinese entities to a U.S. economic blacklist over issues including alleged human rights abuses and military ties.

· Japan govt ready to deploy economic stimulus flexibly, spokesman says

Japan stands ready to pump more money into the economy to ease the pain of a prolonged pandemic, the top government spokesman said on Sunday, nodding to growing political calls for additional stimulus to prop up growth.

· UK exports to EU recover from initial post-Brexit slump

· Sterling set for best day in one week as risk appetite returns

Sterling bounced back versus a weakening dollar on Friday and was set for its best day in a week as risk currencies tried to recover after being hurt by a broader shakeout in FX markets.

Sterling rose to $1.3873 on Friday against a softening dollar. It was 0.3% up by 1525 GMT in a tentative move to cut losses from the previous session.

· Leaders of North Korea, China vow greater cooperation in face of foreign hostility

The leaders of North Korea and China traded messages vowing to strengthen cooperation on the anniversary of their treaty of friendship, cooperation and mutual assistance between the two countries, North Korea’s KCNA news agency reported on Sunday.

In a message to China’s Xi Jinping, North Korean leader Kim Jong Un said their relationship is vital in the face of hostile foreign forces, while Xi promised to bring cooperation “to a new stage”, KCNA said.

· CORONAVIRUS UPDATES:

TOP 10 of Global:

· UK minister confident of further COVID-19 rule easing from July 19

The UK government is confident that plans to lift a range of COVID-19 restrictions will go ahead on July 19 in England but mask-wearing in indoor enclosed places will be expected, vaccine minister Nadhim Zahawi said on Sunday.

· Unvaccinated Belgian woman contracted two COVID variants simultaneously

The society said the woman became sick with Alpha and Beta types first identified in Britain and South Africa and her doctors said she could have contracted the infections from two different people.

· Hundreds of Thai medical workers infected despite Sinovac vaccinations

Reference: CNBC, Reuters, Worldometers