June 29, 2022

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European stocks rise and German bonds rally as traders weigh growth outlook

2 min read

European shares and US stock futures edged higher on Monday, while German government bonds rallied, as investors weighed the economic growth outlook and the future of central bank policy.

The regional Stoxx Europe 600 share index — which is down almost 6 per cent for the year but has erased losses incurred since Russia invaded Ukraine in late February — added 0.3 per cent, led by strong gains for food delivery group Delivery Hero. Germany’s Dax gauge traded flat, as did London’s FTSE 100.

“We have to be humble and say that the range of possible [economic] outcomes, given the war, and the inflation outlook, is really quite wide,” said Kasper Elmgreen, head of equities at Amundi. “Eurozone growth is coming down, but a recession isn’t obvious because consumer and business balance sheets are quite strong.”

Futures contracts tracking Wall Street’s benchmark S&P 500 rose 0.1 per cent, while those tracking the technology-heavy Nasdaq 100 index added 0.2 per cent.

In debt markets, the yield on Germany’s 10-year Bund, a benchmark for eurozone borrowing costs, fell 0.08 percentage points to 0.49 per cent. Bond prices rise as their yields fall.

The moves came as the BDI, Germany’s main business lobby, warned the “economic outlook looks very bleak” because of the impact from the Ukraine war on consumer confidence and investment, as well as supply chain bottlenecks.

At the same time, the UK’s 10-year gilt yield slipped 0.08 percentage points lower to 1.53 per cent.

In the US, the Treasury yield curve is now at its most inverted since 2007, when measured by the difference in two and 10-year borrowing costs. US government bonds recorded their worst quarter on record in the first three months of this year as traders looked ahead to a series of rapid Federal Reserve interest rate rises.

On Monday, the yield on the two-year Treasury note fell 0.02 percentage points to 2.42 per cent. This yield, which is sensitive to interest rate changes, last…

2022-04-04 09:14:48

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