Rising yields lift dollar as oil surges By Reuters

By Tom Arnold and Wayne Cole

LONDON/SYDNEY (Reuters) – World shares edged higher on Monday courtesy of gains in China, while rising Treasury yields lifted the dollar to a near three-year peak against the Japanese yen.

prices extended their bull run to reach ground last visited in late 2018, with gains across the energy complex stoking inflation concerns.

“Higher energy prices, shortages will inevitably make their way through global value chains in the form of rising prices and potentially shortages of industrial and consumer goods,” said OANDA analyst Jeffrey Halley.

“All of this makes the constant blathering from central bankers around the world about inflation being ‘transitory’ ring more and more hollow.”

Inflation jitters kept investors cautious, with the Euro STOXX 50 0.2% lower.

Nasdaq futures and were down around 0.4% and 0.3%, respectively.

The MSCI world equity index, which tracks shares in 50 countries, was 0.1% higher.

Sentiment in China was partly helped by some cities’ planned supportive measures for the beleaguered property market.

China’s blue-chip CSI300 index rose 0.1%, while MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.6%.

The drop in the yen provided a welcome boost to which reversed early losses to rise 1.6%.

The U.S. earnings season kicks off this week and is likely to bring tales of supply disruptions and rising costs. JPMorgan (NYSE:) reports on Wednesday, followed by BofA, Morgan Stanley (NYSE:) and Citigroup (NYSE:) on Thursday, and Goldman on Friday.

U.S. INFLATION, RETAIL SALES

The focus will also be on U.S. inflation and retail sales data, and minutes of the Federal Reserve’s last meeting that should confirm that a November tapering was discussed.

“The week ahead will centre around the US CPI release on Wednesday, but it might be a touch backward-looking given that energy has spiked more recently and that used car prices are again on the march after a late summer fall that will likely be captured in this week’s release,” Deutsche Bank (DE:)’s Jim Reid wrote in a note to clients.

While headline U.S. payrolls number on Friday disappointed, it was partly due to reopening problems in state and local education while private sector employment was firmer.

Indeed, with a lack of labour driving the jobless rate down to 4.8%, investors were more concerned about the risk of wage inflation and pushed Treasury yields sharply higher.

Yields on 10-year notes were trading up at 1.62%, having jumped 15 basis points last week in the biggest such rise since March.

Germany’s 10-year Bund yield rose to its highest since May, up more than 2 basis points to -0.117%.

British gilt yields rose sharply, with the 10-year yield marking its highest…