European stocks opened marginally lower on Friday as risk sentiment deteriorated amid the resurgent bond yields. In recent trading, 10-year Treasury yields jumped higher to hit 1.60% for the first time since Monday. Meanwhile, ECB policymaker, Francois Villeroy, said that there is no risk of inflation overheating in Europe, and the central bank will maintain the accommodative monetary policy as long as necessary.
On the data front, the UK manufacturing production arrived at 2.3% MoM in January versus -0.8% expectations and 0.3% booked in December while total industrial output came in at -1.5% versus -0.6% expected and 0.2% last. Meanwhile, the UK economy contracted less-than-expected in January, arriving at -2.9% vs. -4.9% expectations and 1.2% in the previous month. The index of services arrived at -2.4% 3M/3M versus 0.6% prior.
Against this backdrop, the FTSE 100 in London sheds 0.28% to 6,717, Italy’s FTSE MIB loses 0.28 percent to 24,053, France’s CAC 40 is down by 0.16% to 6,024, while the German DAX 30 is 0.58% lower, at 14,484. US stock index futures are slipping along with European stocks as the 10-year Treasury yield briefly topped 1.6%. Now, the market focus turns to U.S. producer-price data due later today and the Federal Reserve decision next week.
In currencies, dollar demand reemerged amid rising yields on Friday. The greenback eased yesterday but the retreat was short-lived as a risk-off tone is back on the table despite inflation worries have abated somehow. As such, EURUSD is flirting with the 1.1920 area, targeting the 1.1900 figure after failed attempts to challenge the 1.2000 barrier on Thursday. As a reminder, the ECB left the interest rates unchanged on Thursday, as broadly expected, although the central bank announced it will accelerate the pace of asset purchases in the next quarter. On the data front, German final CPI rose at a monthly 0.7% in February and 1.3% from a year earlier. As the results matched the preliminary prints, the common currency was unfazed by the report, staying under pressure amid the rising dollar.
In commodities, oil prices little changed after failed bearish attempts seen earlier in the day. Brent crude managed to hold above the $69 figure and was last seen trading around $69.40, unchanged for the day. The overall picture remains upbeat, but if risk sentiment continues to deteriorate in the coming hours, the futures could struggle to maintain a neutral tone. On the upside, the immediate barrier arrives at $70. A decisive break above this level will bring the market focus back to more than one-year highs seen around $71.40 earlier this month.
Nathan Lambert, Head of Global FX Analytical Department