Europe open: Shares weaker as China bond yields fall below US benchmark

European shares opened lower on Monday on the back of weaker Asian markets as Chinese bond yields fell below their US counterpart for the first time in a decade.

The pan-European Stoxx 600 index was down 0.6% with all regional bourses lower as investors eyed the outcome of the first round of France’s presidential election race and UK GDP figures.

In Paris, President Emmanuel Macron emerged as the winner in the first ballot and will now face the extreme right anti-immigrant Marine Le Pen in a runoff next week.

Macron topped Sunday’s first round of the French presidential election with 27.6% of the vote, ahead of Le Pen’s 23.4%.

In the UK, economic growth slowed more than expected in February, according to figures released by the Office for National Statistics.

GDP rose 0.1% on the month in February, down from 0.8% in January and coming in below consensus expectations of 0.3% growth. That left the economy 1.5% above its pre-coronavirus level in February 2020.

Investors were also fretting over China’s annual inflation rate hitting 1.5% in March, a three-month high. Producer prices were also higher than expected, surging 8.3% year-on-year above estimates for 7.9% as raw material costs surge on the back of supply chain bottlenecks and the war in Ukraine.

"The market is being dragged down by the prospect of softer demand from China after Shanghai continues its Covid-19 lockdown as Beijing focuses on its aggressive zero tolerance policy to the detriment of its economy," said Victoria Scholar, head of investments at Interactive Investor.

"There are fears that lockdowns and economic restrictions could deepen if cases spread to other cities. Meanwhile on the supply side, the US and other countries are starting to find ways to reduce their energy dependence on Russia, plugging the shortfall by adding to rig counts and by planning reserve releases.”

On the equities front, shares in Societe Generale gained as it agreed to sell its stake in Rosbank and the Russian lender's insurance subsidiaries to Interros Capital.

Real estate investor Alstria Office shares soared 11.6% after an announcement post-market closed last Friday that it was returning €1bn to shareholders.