Europe midday: Soft French debt auction hits stocks

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Sharecast News | 06 Jul, 2017

A wave of selling hit European stocks following what some market commentary labelled as a "soft" auction for 30-year French government debt which sent yields flying.

As of 1207 BST, the benchmark Stoxx 600 was down by 0.81% or 3.12 points to 379.87, alongside a fall of 0.74% for the German Dax to 12,362.58 although the FTSE Mibtel was off by just 0.09% to 20,920.23.

News of the result of the French debt sale sent yields on the country's benchmark 10-year note seven basis points higher to 0.89%, with those on similarly-dated bunds up by the same amount to 0.54% - to their loftiest level since January 2016.

In parallel, euro/dollar edging up by 0.15% to 1.1368.

On a related note, speaking in Paris, European Central Bank chief economist Peter Praet reiterated "that maintaining a steady hand continues to be critical to fostering a durable convergence of inflation toward our monetary policy aim."

However, overnight French ECB governing council member Francois Villeroy de Galhau warned that non-standard monetary measures were "not eternal".

Fed minutes in focus

Acting as a backdrop, according to the minutes of the US Federal Reserve's 13-14 June meeting, officials were split about whether to announce the start of the slow process of winding down their balance sheet in the next few months or whether to wait until later in the year in order to gather more information on the outlook for the economy and inflation.

There were also divisions regarding the existence or not of looming financial stability risks.

Yet analysts appeared to be unfazed by the apparent splits, with those at Barclays Research reiterating their call for the Fed would announce the start to tapering its programme of quantitative easing in September.

The minutes of the ECB's own last policy meeting were scheduled for release at 1330 BST.

German factory orders disappointed in May, bouncing back by 1.0% month-on-month, according to the Federal Office of Statistics, which was below the 1.5% rise projected by economists.

In April, they declined by 2.2% on the month.

Later on in the session, Stateside investors will be waiting for the latest monthly ADP private sector payrolls report at 1315 BST, followed by the ISM services sector gauge at 1500 BST and weekly official crude oil inventory data a half hour later.

All of the above, naturally, would come ahead of Friday's all-important monthly US jobs report.

US outfit runs ruler over German lender

Shares in German lender Commerzbank were moving higher on the heels of a Bloomberg report that US private equity outfit Cerberus might be pondering taking a stake in the lender.

Aerospace giant Airbus had reportedly asked Berlin to ensure that domestic companies receive a large share of the contract for a next-generation heavy-lift military helicopter valued at roughly €4.0bn.

Royal Dutch Shell, Total and Exxon Mobil reportedly met Qatar's emir Sheikh Tamim bin Hamad al-Thani before the country announced it would increase its output of liquefied natural gas.

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