Surging Bond Yields Roiled European Stocks Markets

Bridgette Randall
26 Sep, 2023
Frankfurt

European markets retained downward bias and investors debated interest rate path and the impact of higher rates on the economy. 

Benchmark indexes in Frankfurt, and Paris edged lower but in London traded higher and investors reacted to growing global uncertainties. 

Chinese property market worries were in forefront after the most-indebted property group in the world and the largest Chinese property developer faced more headwinds in restructuring its debt. 

China Evergrande said its listed subsidiary Hengda Real Estate defaulted on a 4 billion yuan or $547 million loan principal and interest payment.  

Moreover, the potential U.S. government shutdown and higher crude oil prices also weighed on market sentiment. 

The U.S. federal government is expected to run out of cash if the Congress fails to pass the fiscal year budget on October 1. 

Moody's Investors Service said on Monday that the U.S. federal government shutdown will be "credit negative" and could hamper the country's AAA rating, and push bond yields higher. 

"In particular, it would demonstrate the significant constraints that intensifying political polarization put on fiscal policymaking at a time of declining fiscal strength, driven by widening fiscal deficits and deteriorating debt affordability," Moody's said in a statement. 

 

Europe Indexes & Yields

The DAX index decreased 0.7% to 15,295.80, the CAC-40 index fell 0.8% to 7,067.34 and the FTSE 100 index added 0.2% to 7,638.78. 

The yield on 10-year German bonds decreased to 2.77%, French bonds traded lower to 3.32%, the UK gilts edged down to 4.28% and Italian bonds rose to 4.67%.

The euro edged lower to a three-month low to $1.060, the British pound to $1.218 and the U.S. dollar fetched 91.22 Swiss cents.

Natural gas prices eased after rallying for five days in a row amid supply worries, despite elevated inventories in the region. 

Yesterday, Norway's Gassco extended production shutdown at its Skarv field by a week to October 8. 

Investors have been bidding up prices on the production disruptions worries by extreme weather events and prolonged outages at the U.S. LNG shipment terminals amid ongoing Russia's invasion of Ukraine. 

Brent crude decreased $0.72 to $92.56 a barrel and the Dutch TTF natural gas edged higher €2.99 to €41.45 per MWh.

 

Europe Stock Movers 

Rheinmetall AG advanced 0.2% to €249.20 after the German automotive and arms maker won orders from two companies totaling several hundred million euros. 

Origin Enterprises Plc jumped 6% to €3.34 despite the company reporting lower profit before tax in the fiscal year 2023. 

ASOS Plc decreased 2.7% to 377.60 after the online apparel and fashion retailer reported a decline in sales in the fiscal fourth quarter and warned that net income is likely to be near the bottom end of its estimate. 

Smiths Group plc declined 1.5% to 1,649.0 pence despite the engineering services company reporting record operating profit in the year ending in July. 

Luxury stocks declined for the second day in a row after China property woes deepened and dampened hopes of a speedy economic recovery. 

LVMH, Kering, Hermes and Richemont declined between 1% and 3%.