Europe open: Shares lower as bond yields rise again

European shares opened the final session of the week lower as rising bond yields overnight took some of the momentum out of a positive week.

The pan-European Stoxx 600 index was down 0.24% at 0841 GMT. Regional bourses were mixed, with London’s FTSE 100 0.23% lower after official data showed the economy contracted less than feared in January in response to the latest Covid-19 lockdown.

January GDP showed the economy shrank by 2.9% as the lockdown hit the hospitality and leisure sectors hard. However, it was lower than the 4.9% predicted by economists.

Germany’s DAX was in the red, down 0.33% having been 0.6% lower, or 90 points, in early trade after solid gains all week. Overnight, US benchmark 10-year bond yields rose above 1.6%, sparking renewed fears about rising borrowing costs.

The ECB ramped up bond buying to prevent a surge in borrowing costs that could threaten the Continent's economic recovery.

ECB President Christine Lagarde said the bank would buy government debt at a "significantly higher pace than during the first months of this year". It has set aside €1.85trn (£1.58trn) for buying bonds, but Ms Lagarde said this could be increased “if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation”.

The move is intended to avoid higher borrowing costs in weaker eurozone countries.

“There’s not a whole lot on the agenda to change things up this Friday, which could mean a historic, newsworthy week ends with a whimper, not a bang,” said Spreadex analyst Connor Campbell.

In equity news, British luxury goods group Burberry topped the gainers, jumping 7.2% after lifting full year guidance as sales had rebounded strongly since December.

German carmaker Daimler slipped after French rival Renault sold its entire stake in the company at a discount.

Hammerson shares were up 5% despite the shopping centre owner reporting a more-than-doubling of annual losses as the value of its properties dropped and rental income plunged during the Covid-19 crisis.

Meanwhile, shares in housebuilder Berkeley Group fell after the firm said it was on track to report annual pretax profit similar to the £504m achieved the year before based on "robust" trading in the four months to the end of February.

Forward sales are expected to be more than £1.7bn at the end of the year on 30 April putting the housebuilder in a strong position to start the next financial year.