By Tom Wilson
LONDON, Feb 21 (Reuters) – European stocks fell on Tuesday and bond yields rose after a rebound in business activity in the euro zone this month, fueling predictions that the European Central Bank would maintain its hawkish stance , while inflation remains stubbornly high.
* Eurozone business activity accelerated and expanded much faster than expected, driven by growth in services, despite a contraction in manufacturing.
* The yield on the German 2-year bond, which is the most sensitive to interest rate expectations, hit a 14-year high of 2.95%. It then rose 3 basis points to 2.923%.
* The STOXX 600 fell 1% before erasing some of its losses and trading lower at 0.4%. German and French stocks also lost about 0.3%, respectively.
* Data failed to lift the euro, which fell 0.2% to $1,067, on track to end February lower and break four straight months of gains. So far in February, it has lost almost 2% against the US dollar.
* The pound rose 0.4% against the greenback at $1.2088 and appreciated against the euro after UK PMI data showed an unexpected rebound in business activity in Great Britain. Britain, raising hopes that the economy can avoid a deep recession.
* The MSCI Global Equity Index, which tracks stocks from 47 countries, fell 0.2%.
*February US PMI data will be released later. S&P 500 e-mini futures on Wall Street fell 0.7%.
* The dollar index, which measures the performance of the US currency against a basket of six currencies, traded at 104.11, just below the six-week high of 104.67 hit on Friday.
* The yield on 10-year US Treasury bonds rose 2.3 basis points to 3.852%, after hitting a three-month high on Friday. The two-year US Treasury yield, which tends to track interest rate expectations, rose 3.5 basis points to 4.658%.
* Asian equities fell, with the MSCI Asia-Pacific ex-Japan equity index losing 0.9%.
* Japan’s manufacturing activity contracted in February at the fastest pace in 30 months, amid weaker demand and a struggle to control cost pressures. The Nikkei closed down 0.2%.
(Reporting by Tom Wilson in London and Ankur Banerjee in Singapore; Editing in Spanish by Ricardo Figueroa)