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GLOBAL MARKETS-Stocks mixed amid concerns over Delta variant, tapering talk

Credit: REUTERS/KIM KYUNG-HOON

Asian stocks traded sideways on Tuesday, as concerns over the spread of the Delta variant and expectations of earlier tapering by the Federal Reserve offset strong corporate earnings, while gold and oil recovered after their sharp falls.

By Paulina Duran

SYDNEY, Aug 10 (Reuters) - Asian stocks traded sideways on Tuesday, as concerns over the spread of the Delta variant and expectations of earlier tapering by the Federal Reserve offset strong corporate earnings, while gold and oil recovered after their sharp falls.

Markets were also cautious ahead of U.S. inflation numbers on Wednesday, which coming soon after strong jobs data, could fuel more speculation about the Fed's bond-purchase taper.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was 0.17% higher in mid afternoon after trading most of the day in slight red territory, with China's blue chip index CSI300 .CSI300 also recovering to be 0.43% higher, while South Korea's KOSPI index .KS11 was 0.64% weaker.

Other markets were set to open lower with S&P 500 futures ESc1 dipping 0.12%, Euro STOXX 50 futures STXEc1 down 0.01% and FTSE futures FFIc1 off 0.15%.

"Equities have pretty much tracked sideways, but commodities are slightly weak and that's partly reflecting COVID-19 uncertainty because cases seem to be increasing and background concerns of a slowdown in China," said TD Securities Asia-Pacific strategist Prashant Newnaha.

In Hong Kong, the Hang Seng Index .HSI was 0.78% higher, while the Shanghai Composite .SSEC traded 0.42% higher, and Japan's Nikkei .N225 was up 0.22%.

Gold prices also recovered, after touching a four-month low on Monday as strong U.S. jobs data bolstered expectations of an early tapering of the Federal Reserve's economic support measures.

Officials also said inflation was at a level that could satisfy one leg of a key test for the beginning of interest rate hikes.

"That probably weighted on equities slightly," added Newnaha.

China on Monday reported more COVID-19 infections in what seems to be its most severe resurgence of the disease since mid-2020, as some cities added rounds of mass testing in a bid to stamp out infections.

Australia's benchmark S&P/ASX200 .AXJO was 0.32% higher on the back of strong earnings results, despite the nation's most populous state recording its sharpest daily increase in coronavirus cases.

Oil prices recovered on Tuesday after falling as much as 4% in the previous session, which extended last week's steep losses amid a rising U.S. dollar and concerns that new coronavirus-related restrictions in China could slow a global revival in fuel demand. OR

U.S. crude oil futures CLc1 were trading at $66.98 per barrel, up $0.5 or 0.75%. Brent crude LCOc1 was at $69.37, up $0.33 or 0.48% higher.

The strong jobs data lifted U.S. Treasury yields. Benchmark 10-year notes US10YT=RR were last yielding 1.3135%, down slightly after surging from last week's low of 1.1270%.

"Having swum from a very inflation-better opinion this year to a very disinflation view up to a week or so again, what we are we getting now again is another rotation into some of the reflation trades," said Sean Darby, a Jefferies strategist in Hong Kong.

"The only thing that is different between now and the last 12 to 19 months is that it is likely to be accompanied by a stronger dollar."

U.S. stock indexes were mostly soft on Monday, with the Dow Jones Industrial Average .DJI closing down 0.3%, the S&P 500 .SPX off 0.09% and the Nasdaq Composite .IXIC adding 0.16%.

MSCI's gauge of stocks across the globe .MIWD00000PUS was 0.02% higher.

In the United States, the Senate came closer to passing a $1 trillion infrastructure package, though it still has to go through the House.

Investors were still assessing whether Friday's strong U.S. payrolls report would take the Fed a step nearer to winding back its stimulus and were eagerly awaiting inflation figures due on Wednesday.

"What we're seeing is a little bit of early profit-taking on the back of fear that tapering will come in earlier in September," said Sebastien Galy, senior macro strategist at Nordea Asset Management. "But as you can see, it has little impact because the effect of a better economy far outweighs the substitution effect of higher interest rates."

However, the pace of tapering was still up in the air and would decide when an actual rate increase comes, he said. The Fed is currently buying $120 billion of assets a month.

The spread of the Delta variant could argue for a longer taper.

In currency markets, the dollar index =USD moved 0.02% lower, with the euro EUR= up 0.01% to $1.1739, near its lowest since early April.

The dollar held firm against the yen at 110.32 yen JPY=, near its highest level in about two weeks.

Global assetshttp://tmsnrt.rs/2jvdmXl

Global currencies vs. dollar http://tmsnrt.rs/2egbfVh

Emerging marketshttp://tmsnrt.rs/2ihRugV

MSCI All Country World Index Market Caphttp://tmsnrt.rs/2EmTD6j

(Reporting by Paulina Duran in Sydney and Matt Scuffham in New York; Editing by Shri Navaratnam and Jacqueline Wong)

((paulina.duran@thomsonreuters.com; +61 2 9171 7406; Reuters Messaging: paulina.duran.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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