Europe open: Stocks rise as bond yields ease, French politics in focus

(Sharecast News) - An easing of government bond yields helped European stocks higher on Tuesday morning with markets bouncing back after two days of heavy losses. The Stoxx 600 was up 0.6% at 511.48, bouncing back after a 1.4% combined slump over the past two sessions, with auto and mining stocks leading the risers.

The CAC 40 in Paris was outperforming, up 1% as investors watch political developments in Paris, while FTSE 100 was underperforming with a flat performance as falling shares of BP, Games Workshop and JD Sports Fashion limited upside.

The yield on a 10-year German bund was down 0.3 basis points at 2.591% after hitting its highest level since July the previous session, while the 10-year UK Gilt yield was 2.7bp lower at 4.865% after surging to its steepest since the financial crisis of 2008.

Meanwhile, French 10-year OAT yields were down 1.6bp at 3.444%, pulling back from levels not seen since late-2023, with François Bayrou facing his first big test as France's new prime minister on Tuesday as he outlines his top priorities in a general policy speech to parliament.

"OATs have traded in a range vs Bunds this year despite political noise, but an unfavourable outcome might increase volatility and bring the 10Y spread back to highs around 90 bps. A budget passing could boost OATs, but economic and political realities would still hurt them in the medium term," said Patrick Munnelly, partner of market strategy at Tickmill Group.

Economic data was thin on the ground across Europe on Tuesday, though the market's focus will shift to the States later on, with the US producer price index for December due out at 1430 CEST.

Market movers

Mining stocks in London were performing well as metals prices increased, with Glencore, Rio Tinto and Fresnillo among the best performers.

Also higher were UK housebuilders, including Persimmon, Barratt Redrow and Taylor Wimpey. Persimmon jumped 5% after reporting that full-year underlying pre-tax profit would be around the upper end of market expectations with completions ahead of market forecasts.

Leading the downside was JD Sports Fashion which dropped 10% after downgrading its full-year profit forecast as it posted a drop in revenue for November and December in challenging markets.

Energy major BP was also out of favour after saying it now expects to report lower upstream production for the fourth quarter, while tax charges and foreign exchange losses for the full year will be greater than previously expected.

European peers Repsol and TotalEnergies were also lower, pulling back after tracking oil prices to their highest levels since August.

Auto stocks across the continent were in demand, including VW, BMW, Porsche and Stellantis.