February 27, 2018 / 5:22 PM / 4 months ago

GLOBAL MARKETS-Stocks slip, yields rise during Fed chief's testimony

(Adds U.S. market open, byline, dateline; previous LONDON)

* Stocks turn south, yields rebound on new inflation

* Oil prices dip before U.S. crude inventory data

* Dollar rises more as Powell suggests gradual rake hikes

By Herbert Lash

NEW YORK, Feb 27 (Reuters) - World stock markets broadly fell and government debt yields rose on Tuesday as traders perceived a greater tightening of U.S. monetary policy than forecast after remarks by the new Federal Reserve chief in testimony before the U.S. Congress.

Fed Chairman Jerome Powell pledged to balance the risk of an overheating economy and the need to keep growth on track in his prepared testimony, but Powell’s remark that inflation has strengthened since December sent yields higher and stocks lower.

The 10-year U.S. Treasury, the global benchmark for commercial lending, jumped past 2.9 percent and equity markets in Europe and Wall Street turned south, with MSCI’s key index of global equity performance falling 0.4 percent.

The dollar added to gains against the euro, the yen and a basket of major currencies and gold prices fell as Powell’s comments were in general positive for the greenback, said Brad Bechtel, managing director FX at Jefferies, in New York.

“He is hawkish in the context of being very upbeat on the economy but willing to go at a moderate pace to normalize policy,” Bechtel said.

The dollar index rose 0.54 percent, while the euro was down 0.61 percent to $1.2241. The Japanese yen weakened 0.49 percent versus the greenback to 107.47 per dollar.

MSCI’s stock index <.MIWD00000PUS) of 47 countries shed 0.38 percent. The pan-European FTSEurofirst 300 index of leading regional shares fell 0.19 percent to close at a preliminary 526.18.

On Wall Street, the Dow Jones Industrial Average fell 39.19 points, or 0.15 percent, to 25,670.08. The S&P 500 lost 11.18 points, or 0.40 percent, to 2,768.42 and the Nasdaq Composite dropped 44.17 points, or 0.6 percent, to 7,377.29.

Euro zone bond yields initially rose after Powell’s early comments but soon trimmed those gains in line with U.S. bond yields.

Germany’s 10-year bond yields rose 1.5 bps to 0.674 percent, shrugging off news that German inflation has slowed.

Benchmark 10-year U.S. Treasury notes fell 15/32 in price to push yields up 2.9117 percent.

Oil dipped before weekly data that is forecast to show rising U.S. crude inventories, though investor confidence in OPEC’s ability to curb output helped stem the price slide.

Brent crude futures eased 6 cents to $67.44 a barrel, while U.S. West Texas Intermediate crude fell 12 cents to $63.79.

Editing by Bernadette Baum

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