(Adds more euro zone bond moves, Wall Street outlook)
By Natsuko Waki
LONDON, May 29 (Reuters) - Investors dumped safe-haven bonds
in major economies on Thursday, pushing euro zone government
borrowing costs to a nine-month high following upbeat U.S.
economic data and inflation concerns from costly oil.
World stocks hit this week's high and the dollar rose
broadly after Wednesday's data showed a jump in new orders for
long-lasting U.S manufacturing goods outside the transportation
sector. A gauge of business investment also posted a surprise
rise.
The data, which followed easing concerns about the credit
crisis nine months after its initial outbreak, triggered a
sell-off in U.S. Treasuries and Japanese government bonds.
Euro zone government bonds followed suit, also pressured by
data showing record Spanish inflation and Belgian annual
inflation at a 23-year peak.
"It is a globalised sell-off. This comes from quite big
movements over the past days. It is a combination of the fact
that growth is not as poor as feared in the U.S., combined with
a renewed focus on inflation," said Neils From, chief analyst at
Nordea in Copenhagen.
"There has been a significant turnaround in the rhetoric
from central banks for the past month and this changed the focus
of the market. This is definitely pointing to major central
banks being on hold or maybe raising rates."
Two-year euro zone government bond yields rose as high as
4.303 percent <EU2YT=RR>, their highest since August. The June
Bund future <FGBLc1> hit a fresh contract low.
Euro zone 10-year bond break-even rates -- a gauge of
inflation expectations -- blew out by around 10 basis points to
their highest level in about three years.
Ten-year U.S. Treasury yield rose to 4.073 percent
<US10YT=RR> for the first time since early January.
In Japan, JGB futures tumbled to a 10-month low, pushing
benchmark 10-year yields to a 10-month peak of 1.795 percent as
investors dumped safe-haven bonds they had built up during the
worst stretch of the credit crisis.
Poorly received auctions on both sides of the Atlantic also
soured sentiment for bonds.
PASSING THE COST
In a sign that companies are starting to pass on the cost of
raw materials to customers, Dow Chemical <DOW.N>, the biggest
U.S. chemical manufacturer, said on Wednesday it would raise
prices for all products by up to 20 percent, due to rising
energy prices.
Rising inflation concerns are prompting investors to price
in a possibility that the Federal Reserve will raise interest
rates from the current 2 percent by December.
The FTSEurofirst 300 index <> rose a quarter percent,
while the MSCI main world equity index <.MIWD00000PUS> gained
0.3 percent, inching towards last week's four-month high.
U.S. stock futures <SPc1> were down slightly, pointing to a
weaker open on Wall Street later.
The dollar rose 0.4 percent against a basket of major
currencies <.DXY> to a 1-1/2 week high.
"There have been some cumulative, albeit marginal, upside
surprises in the data that have been encouraging dollar
sentiment," said Phyllis Papadavid, FX strategist at Societe
Generale.
"In terms of the Fed, it is clear that the U.S.
growth-inflation mix is not particularly positive. The Fed is
aware of it and I think they are quite concerned about inflation
prospects."
Emerging sovereign spreads <11EMJ> tightened 4 basis points
while emerging stocks <.MSCIEF> rose 0.9 percent.
U.S. light crude <CLc1> slipped below $130 a barrel, off
last week's record high above $135.
Gold <XAU=>, widely seen as an inflation hedge, followed oil
lower to $892.50 an ounce.
(Additional reporting by Veronica Brown; Editing by Gerrard
Raven)
