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GLOBAL MARKETS-World shares slide on inflation fears, commodities surge

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Herbert Lash
·4 min read
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(Adds close of U.S. markets)

* Expectations of faster growth spurs inflation fears

* Crude oil, metal prices gain on growth outlook

* Bond yields tumble after comments by ECB's Lagarde

* High-flying tech shares tumble in rotation shift

* Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn

* Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Herbert Lash

NEW YORK, Feb 22 (Reuters) - Global stock markets fell onMonday as expectations of faster growth and quickening inflationbattered bonds, boosted commodities and led to a furtherrotation out of the big tech names that have driven the equityrally during the pandemic.

Gold rose more than 1% and copper prices shot above $9,000 atonne for the first time since 2011 on the prospect forinflation and growth, while the dollar slumped to multi-yearlows against the British pound and the Australian dollar.

Oil prices rose on a tight global supply outlook after U.S.production was hammered by frigid weather and an approachingmeeting of top crude producers is expected to keep outputlargely in check.

Investors, who have been buying economically sensitivecyclical stocks and selling growth stocks, are preparing for apotential spike in inflation with the U.S. Congress poised topass a $1.9 trillion pandemic-related economic stimulus bill.

"What we're seeing are expectations really growing thatwe're going to have a return (to) normalcy a lot sooner, andthat's driving the cyclical rotation," said Edward Moya, seniormarket analyst at OANDA in New York.

High-growth stocks, including Apple Inc, MicrosoftCorp, Tesla Inc and Amazon.com,pulled the Nasdaq down and weighed on the S&P 500.

MSCI's all-country world index, which looksat stock market performance across 49 countries, fell 0.85%,also pulled down by the big U.S. tech names.

European shares trimmed early losses as comments by EuropeanCentral Bank chief Christine Lagarde knocked bond yields lower,while rising inflation expectations and profit-taking intechnology stocks dragged the benchmark index lower.

In Europe, the broad STOXX 600 index closed down0.44%, falling to its lowest in 10 days. Germany's DAXfell 0.31%, France's CAC 40 slid 0.11% and Britain'sFTSE 100 lost 0.18%.

On Wall Street, the Dow Jones Industrial Average rose0.09%, eking a small gain. The S&P 500 lost 0.77% and theNasdaq Composite dropped 2.46%.

"Lagarde's comments, talking about longer-term nominal bondyields, poured some cold water on these government bond yieldsthat are getting out of control," Moya said.

Bond yields have risen sharply this month as prospects formore U.S. fiscal stimulus have boosted hopes for a fastereconomic recovery globally, which would also lift inflation.

U.S. economic growth as measured by gross domestic productis expected to run more vigorously than at any time in the past35 years and business investment is expected to run twice asquickly as the broad economy, according to Credit Suisse.

Bank of America Merrill Lynch raised its U.S. GDP forecastfor 2021 to 6.5% and its 2022 expectation to 5% on Monday,citing a larger stimulus package, better news surrounding theCOVID-19 pandemic and encouraging economic data.

Federal Reserve Chair Jerome Powell delivers his semi-annualtestimony before Congress this week and is likely to reiterate acommitment to keeping policy super easy for as long as needed todrive inflation higher.

The 10-year U.S. Treasury note's yield rose 2basis points to 1.3636%. The yield on the benchmark U.S.Treasury note earlier jumped to 1.394%, the highest sinceFebruary 2020.

Earlier in Asia, MSCI's broadest index of Asia-Pacificshares outside Japan fell 1.18%, after slippingfrom a record top last week as the jump in U.S. bond yieldsunsettled investors.

Japan's Nikkei recouped 0.8% but Chinese blue chipslost 1.4%.

Oil prices jumped, with international benchmark Brentgaining 22% for the year to date.

Brent crude futures rose $2.33 to settle at $65.24 abarrel, while U.S. crude futures settled up $2.25 at$61.49 a barrel.

Rising oil and metals prices have been a boon forcommodity-linked currencies, with the Canadian, Australian andNew Zealand dollars all higher for the year.

Sterling hit a three-year top of $1.4068, aided byone of the fastest vaccine rollouts in the world.

The dollar index fell 0.185%, with the euro up0.27% to $1.215. The Japanese yen strengthened 0.33%versus the greenback at 105.08 per dollar.

U.S. gold futures settled up 1.7% at $1,808.40 anounce.

Bitcoin fell 6.1% at $54,003.88 from a recordhigh of $58,354.

(Reporting by Herbert Lash; Editing by Will Dunham, Dan Greblerand Nick Zieminski)