European stocks slump as French bond yields spike and oil holds above $108
Key Takeaways
- •France's 10-year government bond yield spiked roughly 13 basis points to 4.9 per cent as investors priced risk into French debt following riots in France.
- •The spread between French and German 10-year yields widened to its highest closing level since early 2012, when the eurozone sovereign debt crisis dominated bond markets.
- •Higher sovereign yields raise the reference rate for corporate and household borrowing and offer investors a comparatively low-risk alternative to equities, feeding into Monday's stock weakness.
- •Oil prices remained above $108 per barrel after a substantial weekly gain, keeping fuel, transport and manufacturing cost pressures firmly on the corporate agenda.
- •UK company profit warnings have surged as the Iran war drives up costs, alongside a more than one-third slump in Condé Nast UK's profits after a planned sale was scrapped.
European equity markets came under pressure on Monday as a spike in French borrowing costs and elevated oil prices weighed on stocks, according City AM's FTSE 100 live coverage.
European bond markets were left in the red as pressures shifted across markets. The 10-year yield on French government bonds — a direct reflection of the government's cost to borrow — spiked roughly 13 basis points to 4.9 per cent. The spread between French and German 10-year yields widened to its highest closing level since early 2012, with investors pricing the risk of French debt following riots in France.
That spread is one of the eurozone's most closely watched stress gauges. German bonds serve as the bloc's benchmark safe asset, so the gap measures the premium investors demand to hold French debt instead — and levels last seen in early 2012 date from the eurozone sovereign debt crisis, an era when political and fiscal instability dominated bond-market thinking.
Moves in sovereign yields also matter beyond the bond market. They lift the reference rate on which corporate and household borrowing is priced and offer investors a comparatively low-risk alternative to equities, a channel through which France's yield spike fed into Monday's equity weakness.
Oil also remained stubbornly high above $108 per barrel after a hefty weekly gain last week, posing a further threat to equities. Crude is a core input for fuel, transport and manufacturing costs, so its persistence at these levels keeps energy expenses firmly on the agenda for the corporate sector.
Alongside the market moves, City AM's coverage highlighted a series of developing stories:
- UK company profit warnings have surged as the Iran war drives up costs.
- MPs are pressing the competition watchdog to probe 'dominant' firms in the live music industry.
- Tories are calling for urgent action on youth unemployment in the Budget.
- Condé Nast UK's profits slumped by more than a third after a planned sale was scrapped.
- A closer look at what drinking alcohol at football could reveal about sporting fandom.
City AM said it would provide updates from the London Stock Exchange and the wider business world throughout the day, making French borrowing costs and crude the key numbers to track as the session unfolds.
