Stocks see small bounce but bond auctions in focus

European stock markets saw a quick bounce from yesterday’s heavy selling weakness that was dictated by poor manufacturing data out of Germany and political instability in the Netherlands over budget cuts. Within the first hour of trading, the FTSE 100 had climbed 0.5%, whilst the DAX, which fell over 3% yesterday, rose 0.8%.

We have more bond auctions this morning; the results of which maintained a focus of investors in the near term. Spain auctioned €1.93bn worth of treasury bills expiring in 3 and 6 months time, close to the €2bn maximum target. Both bills saw bond yields rise, as expected, with the 3 month average yield rising from 0.381% to 0.634%, whilst the 6 month yield rose to 1.580% from 0.836%.

Whilst rising yields continue to pose a problem, the amount raised is not huge. It is unlikely this auction result dramatically affects debt sentiment within the eurozone.

Of greater interest was the Netherlands 2yr and 25yr bond auction which looked to raise as much as €2.5bn and could be somewhat ill timed as it comes hot on the heels of the Dutch PM handing in the resignation of his cabinet yesterday.

There had been fears that the Dutch coalition’s failure to agree tough austerity measures threatened the country’s Triple A credit rating, but late last night Moody’s admitted the move put the country on a negative watch but their rating remained intact, for now.

The results of the auction were also relatively well received, with the Netherlands raising just under €2bn with average yields on the 2yr bond hitting 0.523% and 25yr bond hitting 2.782%.

This evening the Federal Reserve kicks off the start of a two day FOMC meeting, which closes tomorrow night and the market is eager to hear more rhetoric that confirms more QE remains firmly on the table, after somewhat mixed messaging over the past two months.

From a sector perspective, it’s the banks and insurers that have helped to lead the bounce back in European trading this morning; both FTSE 350 banking and insurance sectors rose between 0.8% and 1.3% in trading, giving a heavyweight lift to the FTSE 100. The miners failed to see a similar return of funds as their bank peers traded largely flat on the day.

Apple reports their respective earnings after the US closing bell tonight. For our outlook, please click here.

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.