Europe close: Stocks mixed amid resurgent bond yields
European stocks finished the session in mixed fashion amid a jump in the euro's value and sharp gains in German government bond yields.
Contributing to those moves, early in the session a Bloomberg report cited Chinese sources according to whom officials in Beijing had recommended slowing or stopping purchases of US government debt, deeming it less attractive and due to trade tensions.
As a result, at the closing bell the US dollar spot index was 0.29% lower to 92.26.
In parallel, the benchmark Stoxx 600 was down by 0.38% to 398.60, alongside a 0.78% drop in the exporter-heavy German Dax to 13,281.34.
Periphery stocks on the other hand fared better, with the FTSE Mibtel adding 0.66% to 23,157.42 and the Ibex 35 little changed at up by 0.02% to 10,428.30.
Nevertheless, as economists at Capital Economics pointed out, China had in fact not been buying US debt for the better part of the last few years. Furthermore, due to its crawling -peg versus the Greenback, they in fact had little choice when it came to the composition of their FX reserves.
Commenting on the market backdrop, Chris Beauchamp at IG said: "Like a ghost from the past, the US ten-year yield is back on the agenda today. The decades-long downtrend in the yield is under threat again, and the usual suspects are out proclaiming this will sound the death-knell of the equity rally. This sounds awfully like one of those predictions that, six months down the line, seems very silly.
"After all, this equity rally has survived a lot worse. As if to underline this fact, markets in the UK, US and Europe are all off the lows of the day. It will take more than just a shift in Chinese bond buying to undo this bull market. Indeed, the S&P 500 looks primed to register more record highs before earnings season gets underway in earnest on Friday, having held above the lows seem on Monday."
Further weighing on sentiment, German Bund yields were sharply higher, gaining eight basis points to 0.54%, although analysts at Unicredit Research attributed the move to the upcoming sale of a new benchmark 10-year issue which was expected to trade seven basis points higher than the old one.
Also on the economic front, according to INSEE French industrial production shrank by 0.5% month-on-month in November, leading to a decline in the year-on-year rate of increase from 5.5% to 2.5% (consensus: 3.0%).
Despite the weak reading, led by a 3.7% decline on the month in output of machinery and equipment, economists at Pantheon Macroeconomics said that 'all-in-all' recent readings were still pointing to a "punchy" 1.7% rise in total output for the quarter as a whole.
Meanwhile, in the corporate patch, shares of Continental were under pressure after it said it was in the early stages of discussions to restructure the German auto parts and tire manufacturer.
French president Emmanuel Macron announced Airbus would soon ink a deal to sell 184 Airbus A320s to China. During the same trip to the Asian giant, Dassault Systemes said it had entered into a strategic cooperation agreement with China Aerospace Science and Technology Corporation.