CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

China meeting with a view to buying Italian bonds fails to lift European stock markets

Article By: ,  Financial Analyst

The small bounce in European stock markets, on the back of talks for China to buy large amounts of Italian bonds and take stakes in Italian firms, was short lived, with investors continuing to take their lead from bond markets, where the benchmark Italian 10-year bond yields continue to race higher.

When the rumours first started flooding the markets last night of the meeting between the Italian finance ministry and China Investment Corp (CIC), China’s sovereign wealth fund, US stocks were lifted around 2% from their lows in response to the news and there has been a follow through into Asia trading also, which did give European stocks support upon market opening.

However, the bounce was short-lived and investors have quickly come to the conclusion that should CIC strike a deal to buy Italian bonds and stakes in companies there, it will not be the long term solution that the markets want to see.

First and foremost, investors have no idea what the size of any bond purchase could be, and secondly China have bought sovereign bonds before and today we still have a huge eurozone debt crisis and so there already exists doubts that any deal could make any long term impact. The reaction in Italy’s bond market this morning, where benchmark 10-year Italian bond yields have risen to over 5.72%, tells a tale that European investors have so far merely shrugged their shoulders at the news.

It is from bond markets that stock markets continue to take their lead and with Italian bond yields rising further, the short bounce in stocks was quickly sold into with the FTSE 100 losing around 1%, whilst the DAX and CAC fell 1.5% and 2.5% respectively.

We may even see more bond woes later this morning as Italy auctions off longer term debt such as 5-year bonds whereby if one takes a lead from yesterday’s 12-month T-Bill auction, yields could be set for another expensive jump in the cost of borrowing for the indebted nation.

Further woes were seen for French banks, with Societe Generale, BNP Paribas and Credit Agricole all losing between 6%-9% yet again this morning, to add to yesterday’s 10% losses.

Commodity stocks have also led the fall in EU indices today, with the miners and oil firms all key drags with investors wanting to see gains in the prices of copper and crude oil before buying back into these sectors.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024