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GLOBAL MARKETS-Stocks steadier as real bond yields back off

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·4 min read
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* Real yields return to negative territory

* Oil trades above $100 a barrel

* Dollar hits fresh two-decade peak vs yen

* Nasdaq futures ease after Netflix

* Procter & Gamble raising full year sales forecast

By Huw Jones

LONDON, April 20 (Reuters) - Stocks clung to firmer ground on Wednesday, helped by real bond yields returning to negative territory as investors assessed the impact on company earnings and the economy of the war in Ukraine.

Tech-heavy Nasdaq futures were slightly weaker, with S&P500 futures firmer, signalling a mixed start on Wall Street as the earnings season continued, with cleaning and personal healthcare products maker Procter & Gamble raising its full-year sales forecast.

The MSCI all-country stock index was 0.2% firmer.

Investors kept a wary eye on 10-year Treasury Inflation-Protected Securities (TIPS), yields on which have broken above negative territory for the first time since March 2020.

TIPS yields were down 4 basis points on the day on Wednesday at -0.07%, having briefly turned positive for a second day, rising to as high as 0.035%.

A rise in real yields poses a fresh headwind for risky assets such as stocks, especially big tech firms which report earnings next week. They will be more closely scrutinised after Netflix shares sank on Tuesday evening following news it was losing subscribers.

"You are going to have to see real yields in much more positive territory before they make stock markets less attractive," said Michael Hewson, chief market analyst at CMC Markets.

"The bigger question the markets are wrestling with at the moment is, has inflation peaked? If inflation has peaked, then maybe it's a good time to buy bonds again, which is why we are seeing so much uncertainty as to the future direction of the stock markets."

The dollar climbed to a fresh two-decade peak to the yen, buoyed as the Bank of Japan stepped into the market again to defend its ultra-low interest rate policy.

Benchmark 10-year Treasury yields were within a whisker of 3% on Wednesday, though slightly down on the day.

Data is beginning to emerge from the International Monetary Fund this week on how much the two-month-old war in Ukraine is hitting the global economy.

The U.S. Federal Reserve issues its "Beige Book" of economic conditions from late February to early April on Wednesday. "We expect the pace of economic activity eased slightly to a modest pace," UniCredit analysts said in a note.

In an election which has rattled French bonds, President Emmanuel Macron and far-right candidate Marine Le Pen will face each other in a televised debate on Wednesday evening. Macron appears to be pulling ahead of Le Pen in the polls ahead of Sunday's final round in the election.


Oil prices rebounded as a drip in U.S. oil inventories and converns over tighter supplies from Russia and Libya drove a recovery from the previous session's sharp losses.

Brent crude futures rose 1.3% to $108.65 a barrel.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3%, its first positive session in a week.

China bucked the regional trend, with Chinese blue chips shedding 1.5% after the central bank kept its benchmark lending rates unchanged, despite frequent government pledges to support a slowing economy hit by the worst COVID-19 outbreak in two years.

The rate decision helped the Chinese yuan recover after hitting its lowest since October in early trade.

"Investors were looking for stimulus from China but the PBOC didn't deliver today," said Carlos Casanova, senior Asia economist at UBP.

"Markets inevitably are going to interpret that in a negative way with the lockdowns extending into April and beyond, meaning the worst months for economic data are ahead of us."

The yield on a highly-traded contract of China's 10-year government bond fell below that on the U.S. 10-year Treasury for the first time since 2010 earlier this month, and Chinese 10-year yields were last around 2.85%.

Yield differentials are also a factor for Japan, where the central bank on Wednesday offered to buy an unlimited amount of 10-year Japanese government bonds (JGB) at 0.25%, in its third move since February to defend its yield target.

Spot gold edged up 0.2%, recovering from its lowest in a week as bond yields eased.

(Reporting by Huw Jones in London, Tom Westbrook in Singapore and Alun John in Hong Kong; Editing by Himani Sarkar, Kim Coghill and Catherine Evans)