European Bond Prices Decline Due to Supply Concerns as Oil Prices Fall: Market Recap

European bond prices dropped following the news that Germany will again suspend debt limits, with worries mounting over increased borrowing in the slowing euro-area economy. This marks the fourth consecutive year that Germany will suspend its debt limits.

The radical budget overhaul implemented by Chancellor Olaf Scholz’s government in response to a ruling last week from Germany’s top court has also contributed to the decline in European bond prices. Yields on German 10-year debt climbed by up to six basis points, and other core European bonds also saw an increase following comments by policymakers.

This news has long-term implications, as evidenced by an account of the ECB’s last policy meeting, which showed that officials agreed to raise borrowing costs if necessary. Meanwhile, European stocks have struggled for traction at the Stoxx Europe 600 index, edging roughly 0.3% higher.

Furthermore, data revealed that S&P Global’s purchasing managers’ index was in a state of contraction in November, hitting 47.1, which was a larger increase than economists anticipated but still marked the sixth consecutive month below the 50 level indicating expansion.

Some European stocks, such as Dutch firms and the UK’s Virgin Money UK Plc, have faced declines, influenced by factors such as the unexpected victory of far-right lawmaker Geert Wilders in the Netherlands’ elections and the UK bank’s results missing estimates due to higher impairments and costs.

Swedish stocks, however, experienced a surge and the krona weakened after the country’s central bank decided to leave its main benchmark rate at 4%. On the other hand, US equity futures showed minimal change due to the Thanksgiving holiday. Japanese markets were also closed.

In commodities, discord within OPEC+ has affected crude oil prices. Discord led to the group delaying an upcoming meeting, affecting speculation about further production cuts by the Saudi-led alliance. Brent crude sank below $81 a barrel, while West Texas Intermediate was under $76.

Iron ore prices tumbled after Chinese authorities reinforced efforts to cool the rally in the steelmaking ingredient. Bloomberg’s industrial metals subindex also saw prices of nickel, copper, and aluminum retreat.

Flagship of Asia, Country Garden Holdings Co., experienced a surge in shares and bonds following news that Beijing included the builder in a draft list of 50 developers eligible for financial support, in an effort to combat the housing crisis.

Key events to look out for this week include the Thanksgiving holiday with US markets closed on Thursday and the US holiday shopping season kick-off on Black Friday. Additionally, ECB’s Christine Lagarde is scheduled to speak Friday. Overall, this story was produced with the assistance of Bloomberg Automation.


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