European Bond Yields Edge Lower, France Faces Higher Fiscal Instability After Collapse of Government

Bridgette Randall
05 Dec, 2024
London

European markets overlooked growing political uncertainty in France, and bond yields edged lower amid rate cut expectations. 

Benchmark indexes in Paris, Frankfurt, and Milan edged higher, but in London traded down in tight trading. 

For the first time in more than sixty years, the French parliament's lower house toppled the government after two opposition groups of lawmakers voted in favor of a no-confidence vote. 

President Emmanuel Macron has the difficult task of finding a new prime minister who can hold the next minority government together till the earliest possible election next summer. 

The constitutional provision will allow the French government to function without the social security bill and finance bill and avoid the government shutdown for now. 

It will be weeks or maybe months before the next government is formed in Paris, and this could put more pressure on the euro. 

 

Eurozone Retail Sales Struggle to Advance in October

On the economic front, Euro Area retail sales declined from the previous month in October, after rising in the previous three months. 

Retail sales decreased 0.5% from the previous month, driven by a 0.9% decline in non-food sales compared to an increase of 1.3%. Auto fuel sales eased at a slower pace of 0.3% compared to a fall of 0.6% in the previous month, respectively. 

However, the sale of food, beverages, and tobacco rebounded to 0.1% from a decline of 0.7% in the previous month, Eurostat reported Thursday. 

On an annual basis, retail sales rose for the fourth month in a row but increased at a slower pace of 1.9% in October, following an upwardly revised 3.0% rise in the previous month. 

Retail sales advanced in seven of the ten months in October, driven in large part by higher prices and rising wages. 

 

Europe Indexes and Yields

The DAX index increased by 0.4% to 20,320.06; the CAC-40 index rose by 0.4% to 7,329.83; and the FTSE 100 index inched lower by 0.1% to 8,330.69.

The yield on 10-year German bonds edged lower to 2.06%, French bonds inched down to 2.86%, the UK gilts edged lower to 4.25%, and Italian bonds decreased to 3.17%.

The euro edged higher to $1.05; the British pound inched up to $1.27; and the U.S. dollar eased to 88.40 Swiss cents.

Brent crude increased $0.22 to $72.54 a barrel, and the Dutch TTF natural gas fell by €0.22 to €47.06 per MWh. 

 

Europe Stock Movers

Vodafone Group plc increased 0.9% to 70.43 pence after the UK's competition commission approved the company's merger with Hutchison's Three UK. 

Unibail-Rodamco-Westfield SE edged up 0.9% to €77.10, and the French real estate company acquired a 38.9% stake in URW Germany GmbH from Canada Pension Plan Investment Board in a private transaction. 

DS Smith plc declined 1.1% to 570.50 pence after the paper and packaging company reported a decline in revenue and earnings in the first half. 

Frasers Group PLC dropped 11.5% to 657.0 pence after the sneaker and athletic apparel retailer lowered the upper end of its full-year profit estimate. 

Future plc increased 13.4% to 1,115.0 pence after the publishing company reported better-than-expected full-year results. 

Revenues in the fiscal year ending in September were flat at £788.2 million, pre-tax profit declined 25% to £103.2 million from £138.1 million, and diluted earnings per share dropped 29% to 66.8 pence from 94.1 pence a year ago. 

In the year, the publisher of Country Living and Marie Claire repurchased £64.7 million of its own stock and paid a dividend of £3.9 million. 

The company announced a new stock buyback plan of £55 million starting in January 2025. 

Safran SA declined 5% to €217.10 after the aircraft equipment maker issued new financial targets for 2025. 

The company estimated 2025 revenue growth of 10%, recurring operating income to range between €4.7 billion and €4.8 billion, and free cash flow between €2.8 and €3.0 billion. 

The company plans to repurchase its own shares worth 5 billion between 2025 and 2028.