GLOBAL MARKETS-Bond yields, oil prices fall as gloom persists

Wed Oct 15, 2014 7:40am EDT
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* Caution reigns after disappointing China inflation reading

* Global shares stabilise, Europe choppy on Shire M&A hit

* Bond yields, oil prices hit fresh lows on demand fears

By Lionel Laurent

LONDON, Oct 15 (Reuters) - Persistent fears over the health of the global economic recovery kept bond yields and oil prices falling on Wednesday, with stocks also failing to break their recent losing streak.

Market volatility has surged in recent weeks as investors weigh the timing of expected interest rate increases, especially in the United States, against disappointing macroeconomic signals such as a worse-than-expected inflation reading from China.

Investors sought refuge from cooling economic activity in safe-haven government bonds across the euro zone, with German bund yields hitting a record low. Pressure is growing on the European Central Bank (ECB) to ease monetary policy further to spur growth in the region.

"With deflation worries still very much at the fore of the euro area and the pressure on the ECB to take further action in coming months, bunds will remain underpinned in the near term," said Nick Stamenkovic, bond strategist at RIA Capital Markets.

After a stable start to the European trading day, stocks were firmly in the red by 1117 GMT, with the MSCI All-Country World index down 0.2 percent and the pan-European FTSEurofirst down 1 percent.   Continued...