MSCI World index steady; T-Bill yields perk up Gold on course...

• MSCI World index steady; T-Bill yields perk up
• Gold on course for third week of gains
• Reflation trade in question as COVID-19 cases rise
• Wall Street stock futures up 0.3%
• Treasury rally stalls: https://tmsnrt.rs/3dXKQYM

World stocks steadied, Treasury yields bounced and the dollar held firm on Friday as markets took a cautious breather in the face of new concerns about the pace of the economic recovery from COVID-19.

Markets have been roiled this week as a rise in cases of the Delta coronavirus variant crimped risk appetite and led to a flight to safety, with some betting the post-pandemic reflation trade had stalled and secular stagnation was back on the agenda.

"There seems to be the gradual realisation for many that the vaccination programmes alone won’t prove enough to get economies back to their pre-COVID normality, with cases at the global level now ticking up again as the more infectious Delta variant spreads across the world," said Deutsche Bank analyst Jim Reid.

Weighed against that is the still ultra-easy monetary policy from many major central banks, although some fear this could yet be curtailed if inflation picks up and policymaker largesse is reined in.

"Swings in sentiment and positioning may prove to be powerful in both directions. But ultimately, the data will be key," said Mark Dowding, chief investment officer at BlueBay Asset Management.

On Friday, data from China showed new bank loans rose more than expected in June, while broad credit growth also picked up. China's central bank also announced a new cut in the cash banks must hold in reserve, trying to shore up growth.

The MSCI World index .MIAPJ0000PUS edged higher, up 0.1%, as gains among many European bourses helped offset overnight weakness in Asia, but remains on course for a weekly fall of around 1%.

The STOXX Europe 600 .STOXX index was up 1%, recovering more than half of the prior session's decline, but still on course to record the second straight week of losses.

Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS had briefly touched two-month lows before paring losses to trade down 0.1%. U.S. stock futures pointed to a higher open on Wall Street, up 0.3%.

Analysts said an accumulation of events had triggered the more cautious sentiment.

Fears central banks could choke economic recovery by tightening policy to try to curb inflation, the rapid spread of the Delta variant and low rates of vaccination have darkened the outlook.

In Australia, stay-at-home orders were introduced in Sydney to combat the spread of the virus. Vietnam also introduced new restrictions. Record deaths were reported across South Asia.

Federal Reserve Bank of San Francisco President Mary Daly told the Financial Times that low vaccination rates in some parts of the world posed a threat to U.S. growth.

After dipping sharply over the early part of the week, yields on 10-year Treasury notes US10YT=RR were on Friday up around 4.5 basis points to 1.336%, off the 4-1/2 month low of 1.25% hit on Thursday.

A reading on Thursday on the number of Americans filing new unemployment claims added to views that the job market recovery from the pandemic continues to be choppy.

In Europe, safe-haven German Bund yields ticked higher but were still eyeing the biggest two-week drop since March 2020 DE10YT=RR as investors eyed a likely longer road to economic recovery.

In currencies, the safe haven yen JPY= was up 0.3% at 110.10 per dollar, heading for its biggest weekly rise since November. The euro EUR= dipped to $1.1837.

That left the dollar index =USD , which tracks the greenback versus a basket of other major currencies, hovering around flat, last down 0.1% at 92.284.

"The most important issue to consider is the current drop in yields globally, and what this downward trend implies in terms of risk aversion and trade repositioning," Thomas Flury, Head of FX Strategies at UBS Global Wealth Management, wrote in a note.

"So far, we think markets are trapped in some momentum trades, which have little persistence."

Gold XAU= , another safe-haven asset, was on track for its third straight weekly gain. It was last up 0.1% at $1,804 an ounce.

Oil prices added to overnight gains as U.S inventories declined, but remain on course for a weekly loss. Brent crude LCOc1 was up 67 cents to $74.79 a barrel. U.S. crude CLc1 added 79 cents to $73.73 per barrel.

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Asia stock markets	https://tmsnrt.rs/2zpUAr4 

Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA Treasury rally stalls https://tmsnrt.rs/3dXKQYM

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