European stocks are enjoying a solid rebound at the open today, with the retreat in bond yields offering some respite for equities as we head into the final stretch of the week. The positive start also reflects a bit of catching up to Wall Street, after US stocks managed to pare some of their losses late in yesterday’s session. That came well after European markets had closed, with major indices in the region seeing red.
To start the day, the gains are rather convincing across the board as seen below:
- Eurostoxx +0.8%
- Germany DAX +0.9%
- France CAC 40 +0.9%
- UK FTSE +0.8%
- Spain IBEX +0.9%
- Italy FTSE MIB +0.9%
The pullback in bond yields is helping to ease some of the pressure on equities for now, after the relentless rise in borrowing costs earlier this week. That has been a major headache for European markets, especially with ongoing fiscal concerns in France adding to the unease surrounding sovereign debt.
10-year Treasury yields have dropped back to around 5.24% today, down from the overnight high of around 5.35%. Meanwhile, 10-year French bond yields have also eased to 4.83% after the high yesterday nearly hit 4.97%.
For the time being, Wall Street’s late recovery yesterday is also giving European investors something to work with. US stocks still ended the session lower, but the fact that buyers managed to claw back some of the earlier losses is helping to set a more positive tone today. And that is also reflected in US futures, with S&P 500 futures seen up 0.4% and Nasdaq futures leading the way with gains of 0.9%.
Having said that, I wouldn’t get too carried away with the rebound just yet.
Sure, bond yields may be easing for now. However, the broader concerns surrounding inflation, elevated oil prices and government borrowing costs haven’t exactly gone away.
For now, the retreat in yields is allowing equity buyers to seek out some breathing room. But whether or not the rebound can actually stick is the real question, especially with next week’s US CPI report still looming.
This article was written by Justin Low at investinglive.com.