Europe open: Stocks rise as bonds steady after sell-off

(Sharecast News) - European markets headed higher on Thursday, following strong gains on Wall Street and Asian indices overnight, as bond yields retreated from their recent highs. By 0928 BST, the Stoxx 600 index was up just 0.4% at 442, with the Cac 40 rising 0.2%, the Dax and FTSE MIB gaining 0.3%, the FTSE 100 trading 0.4% higher and the Ibex 35 up 0.5%. The Stoxx 600 index has fallen for seven out of the past ten trading sessions, dropping 4.2% during that period.

"Markets are constantly exhibiting forward-looking behaviour, and for today, it could simply be a case where folks are starting to think that bond vigilantes are wearing out their welcome," said Stephen Innes, managing partner at SPI Asset Management.

Stocks across Asia and the US put in a decent performance on the back of weaker-than-expected ADP labour-market data and ISM non-manufacturing stats from the States, causing US Treasury yields to pull back from their highest levels since 2007. Meanwhile, oil prices tanked, with Brent finishing down more than 5% to $85.81 a barrel as a result on demand concerns, providing some optimism that inflationary pressures may soon begin to ease.

Bond yields were bouncing back slightly on Thursday but still remain below their recent highs: the 10-year US Treasury yield was up 0.6 basis points at 4.743%, having touched a 16-year high of 4.887% on Wednesday morning before pulling back; while the Germany 10-year Bund yield was up just 2 basis points at 2.943%, after hitting a high of 3.027% in recent days - a 12-year high.

"The US labour market is set to remain in the spotlight today, as well as tomorrow when we get the September non-farm payrolls report, which after yesterday's slowdown in the ADP numbers, could set the seal on another rate hike in November, or keep markets guessing ahead of next week's CPI report," said analyst Michael Hewson from CMC Markets.

In European economic data on Thursday, the HCOB Eurozone construction purchasing managers' index pointed to a further marked deterioration at the end of the third quarter, with new business sales dropping to their lowest level since May 2020. The PMI rose slightly to 43.6 in September from 43.4 in August but still firmly in negative territory (ie under 50).

French industrial output declined by 0.3% in August after a revised -0.5% in July, but the decline in Spanish industrial output worsened to 0.8% from a revised +0.1% in July.

Meanwhile, the German trade surplus fell to €16.6bn in August, down from a revised €17.7bn in July but above the €15bn forecast.

In stock movements, oil and gas stocks were out of favour after the dramatic drop in crude prices on Wednesday, with BP, Shell, TotalEnergies and Repsol all registering losses.

Shares in Pandora surged in Copenhagen after the Danish jewellery group said it expects organic growth of 7-9% from 2023 to 2026.