Major European stock indices closed with mixed results, with the UK's FTSE 100 leading the gains, followed by France's CAC and Germany's DAX. Spain and Italy moved lower. The session paired firmer equities in London, Paris and Frankfurt with falling borrowing costs across the region's major bond markets.

Closing snapshot

• Germany's DAX: +69.41 points, or +0.27%, at 25,368.03
• France's CAC: +61.59 points, or +0.78%, at 7,934.71
• UK's FTSE 100: +115.47 points, or +1.08%, at 10,840.34
• Spain's IBEX 35: -53.00 points, or -0.28%, at 19,177.71
• Italy's FTSE MIB: -356.29 points, or -0.72%, at 49,397.56

The spread between the UK and Italy was about 1.8 percentage points. Buyers had the upper hand in some markets, but the gains were far from uniform.

European bond yields move lower

Benchmark 10-year yields fell across the major European markets, with Spain and Italy leading the declines:

• Germany: 3.412%, down 3.0 basis points
• France: 4.794%, down 6.7 basis points
• UK: 5.379%, down 4.1 basis points
• Spain: 4.023%, down 7.0 basis points
• Italy: 4.491%, down 6.9 basis points

Falling yields translate into higher prices for existing bonds and a lighter borrowing-cost backdrop for governments that issue debt at these benchmarks. French, Spanish and Italian yields fell more than Germany's, narrowing their yield spreads against the German benchmark — the measure markets use to gauge how risk is priced across euro area sovereigns.

US stocks: Dow higher, Nasdaq lower, S&P 500 hovering near unchanged

The US stock market also showed a split as European traders exited:

• Dow Industrial Average: +495.03 points, or +0.96%, at 52,121.20
• S&P 500: +8.30 points, or +0.11%, at 7,727.24
• Nasdaq Composite: -97.11 points, or -0.36%, at 26,595.75
• Russell 2000: +22.34 points, or +0.82%, at 2,751.87
• Nasdaq 100: -180.23 points, or -0.60%, at 29,770.58

The Dow and small caps outperformed, with the Russell 2000 the most widely followed gauge of smaller US companies, while the technology-heavy indices remained under pressure. Lower yields provided a more supportive backdrop, but technology buyers still had some work to do.

Treasury yields retreat, led by the longer end

US Treasury yields were lower across the curve despite the higher PPI data, the inflation reading that tracks prices received by US producers and is closely watched for its implications for monetary policy:

• 2-year: 4.770%, down 3.2 basis points
• 5-year: 4.861%, down 4.9 basis points
• 10-year: 5.102%, down 8.8 basis points
• 30-year: 5.429%, down 9.5 basis points

The larger declines in longer-dated yields are flattening the curve, narrowing the gap between short-term and long-term borrowing costs.

Dollar mostly lower; Australian dollar bucks the trend

The US dollar was lower against most major currencies, with the Australian dollar the lone major moving in the dollar's favor:

• EURUSD: 1.1204, up 0.43%
• GBPUSD: 1.3250, up 0.45%
• USDJPY: 158.19, down 0.08%
• USDCHF: 0.8293, down 0.64%
• USDCAD: 1.4195, down 0.29%
• NZDUSD: 0.5607, up 0.29%
• AUDUSD: 0.6913, down 0.80%

The Australian dollar stood out for its weakness despite the broader selling in the greenback. Weaker-than-expected Australian employment sealed the bearish fate of the AUDUSD, although the price is off the lows (see post on the technicals for the AUDUSD here).

In EURUSD, the price decline (a stronger dollar) after the PPI and other data found support buyers at the 100-hour moving average at 1.11867, and the price is back above the 200-hour average at 1.1201. The 100-hour MA is the barometer for bulls and bears: staying above keeps the buyers in play, while a move below would leave the sellers in full control.

GBPUSD also held near its 100/200-hour moving averages, which sit close together at 1.32327. On the topside, the 1.3273 level needs to be broken, and stay broken, to increase the bullish bias. Those moving-average and breakout levels are the reference points traders will be watching as the dollar's broad retreat is tested in the sessions ahead.

Source: Investinglive