March 25, 2019 / 12:25 PM / 3 months ago

GLOBAL MARKETS-Positive German data tempers equity selloff, safe havens in demand

* World stocks hit 12-day low

* U.S. futures point to lower open

* German Ifo surprise briefly lifts bund yields

* U.S. yield curve flirts again with inversion

* Global FX rates:

By Karin Strohecker

LONDON, March 25 (Reuters) - World stocks hit a 12-day trough on Monday as fears for economic growth sent investors dashing for safe-haven assets, but the selloff lost some momentum after better-than-expected data from Germany.

The Ifo Institute’s March business climate index unexpectedly rose, soothing nerves after the country’s dismal manufacturing data on Friday helped spark a global selloff that hammered stock markets and pushed key benchmark bond yields below zero.

Crucially, an inversion in the U.S. bond yield curve on Friday had stoked fears that the world’s largest economy was headed for recession.

The Ifo report cushioned some of the falls for European stocks with indexes in Frankfurt and Paris easing 0.2 percent. London’s FTSE fell 0.5 percent.

From being the biggest sectoral drag in opening deals, financials were now the main uplift for the STOXX 600, while media, tech and industrials suffered the biggest declines.

“We had a dire end to 2018 which was then recouped so you have a very good reason to lighten up on portfolios,” said Marie Owens Thomsen, chief economist at CA Indosuez in Geneva, adding that confusion over the state of play in Britain’s impending departure from the European Union clouded the picture more.

“Many people may have realised a major part of their expected returns for the year, so in light of recent gains it makes sense for investors to should lighten up on risk.”

The falls in Europe follow hefty tumbles in Asia where Japan’s Nikkei hit a five-week low after diving 3.1 percent for its largest one-day percentage fall since late December. Stocks in China and South Korea also tumbled.

MSCI’s gauge of stocks across the globe slipped 0.5 percent. The gloomy mood was expected to spread to U.S. markets with S&P 500 futures skidding 0.3 percent while Nasdaq futures slipped 0.5 percent.

In fixed income markets, the Ifo data helped Germany’s benchmark 10-year bond yield to briefly stray back into positive territory, before slipping back sub-zero.

U.S. 10-year treasury yields rose after the data, but gave away some of the gains to stand at 2.6410 percent. Spreads between U.S. three-month and 10-year Treasury yields had turned positive earlier in the day but moved closer again to inversion as the European session wore on.

On Friday, the U.S. yield curve inverted for the first time since 2007, ringing alarm bells for investors with an inverted curve - where long-term rates fall below short-term - seen as a signal for an upcoming recession.

“The bond market price action is an enormous blaring siren to anyone trying to be optimistic on stocks,” JPMorgan analysts said in a note to clients.

“Growth, and bonds/yield curves, will be the only thing stocks should be focused on going forward, and it’s very hard to envision any type of rally until economic confidence stabilizes and bonds reverse,” it added.

Politics was also in focus in the United States and Britain.

U.S. Special Counsel Robert Mueller concluded after a long investigation that nobody associated with President Donald Trump’s campaign conspired with Russia during the 2016 presidential election, according to a summary issued by Attorney General William Barr on Sunday.

Political turmoil in Britain over the country’s exit from the European Union also remains a drag on markets.

Prime Minister Theresa May held crisis talks with senior colleagues and hardline Brexiteers on Sunday trying to breathe life into her twice-defeated European divorce deal after reports her cabinet was plotting to topple her.

Rupert Murdoch’s Sun newspaper said in a front page editorial May must announce on Monday she will stand down as soon as her Brexit deal is approved.

The British pound was 0.2 percent lower after three straight days of wild gyrations. The currency had slipped 0.7 percent last week.

The Japanese yen - a perceived safe haven - traded 0.2 percent softer at 110.15 per dollar, knocked off earlier six-week highs.

In commodities, U.S. crude fell 21 cents to $58.83 per barrel. Brent crude futures eased 42 cents to $66.75. The price of gold - a traditional safe haven - rose.

Reporting by Karin Strohecker, additional reporting by Sujata Rao; Editing by Hugh Lawson

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