Global stocks tread water

Global shares treaded water on Monday as sharp falls in gold and oil  prices briefly spooked sentiment, while the US dollar reached four-month  highs on the euro after an upbeat US jobs report lifted bond yields.

European  shares were mixed in early trading, as a fall in commodity prices  weighed on Britain's blue-chip index, while other regional indexes  stayed near recent highs with earnings season winding down.

The  FTSE Eurofirst 300 index was trading flat, Britain's FTSE 100 index  dipped 0.3 per cent and Germany's DAX 30 fell 0.3 per cent.

MSCI's All Country World Index, which tracks shares across 49 countries was flat on the day.

Markets  were shaken early by a sudden dive in gold as a break of US$1,750  triggered stop loss sales to take it as low as US$1,684 an ounce. It was  last down 1 per cent at US$1,745. Brent also sank 2 per cent on concerns the spread of the Delta variant of the coronavirus would temper travel demand.

Holidays  in Tokyo and Singapore made for thin trading conditions, adding to the  volatility. Yet after an initial fall, MSCI's broadest index of  Asia-Pacific shares outside Japan recovered to be up 0.1 per cent.

They  were helped by China's blue chips index which added 1.3 per cent.  Japan's Nikkei was shut but futures were trading a modest 20 points  below Friday's close.

Nasdaq futures slipped 0.1 per cent and S&P 500 futures 0.2 per cent.

Chinese  trade data out over the weekend undershot forecasts, while figures out  Monday showed inflation slowed to 1 per cent in July offering no barrier  to more policy stimulus.

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

Investors  were still assessing whether Friday's strong US payrolls report would  take the Federal Reserve a step nearer to winding back its stimulus.

"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. 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," said Sebastien Galy,  senior macro strategist at Nordea Asset Management.

However, the  pace of tapering was still up in the air and would decide when an actual  rate increase came, he said. The Fed is buying US$120 billion of assets  a month, so a US$20 billion taper would end the programme in six months  whilst a US$10 billion tapering approach would take a year.

The  spread of the Delta variant could argue for a longer taper with US cases  back to levels seen in last winter's surge with more than 66,000 people  hospitalised.

Figures for July CPI due this week are also  expected to confirm inflation has peaked, with prices for second-hand  vehicles finally easing back after huge gains.

There are four Fed  officials speaking this week who will no doubt offer enough grist for  markets looking for clues on the timing of tapering.

In the  meantime, stocks have been mostly underpinned by a robust US earnings  season. BofA analysts noted S&P 500 companies were tracking a 15 per  cent beat on second quarter earnings with 90 per cent having reported.

"However,  companies with earnings beats have seen muted reactions on their stock  price the day following earnings releases, and misses have been  penalized," they wrote in a note.

"Guidance is stronger than average but consensus estimates for two-year growth suggest a slowdown amid macro concerns."

Financials  firmed on Friday as a steeper yield curve is seen benefiting bank  earnings, while also penalising the tech sector where valuations are sky  high.

Yields on US 10-year notes were up at 1.29 per cent in the  wake of the jobs report, having hit their lowest since February last  week at 1.177 per cent.

That jump gave the US dollar a broad lift  and knocked the euro back to US$1.1760, and briefly to its lowest since  April at US$1.1740. The US dollar likewise climbed to 110.22 yen and  away from last week's trough of 108.71.

That took the US currency index up to 92.882 and nearer to the July peak of 93.194.

Oil  prices eased further after suffering their largest weekly drop in four  months amid worries coronavirus travel restrictions would threaten  bullish expectations for demand. Brent fell US$1.29 to US$69.41 a  barrel, while US crude lost US$1.34 to US$66.94.