European equities end lower as bond yields rise

The main European stock indexes ended the day in negative territory, with every major market dropping by over 1%. Italy and Spain posted the largest losses, though the declines were broadly similar across the board. It was a poor trading session.

Final figures for the day were:

• Germany’s DAX: 25,319.78, down 302.84 points or 1.18%.

• France’s CAC: 7,868.06, down 88.63 points or 1.11%.

• UK’s FTSE 100: 10,764.70, down 117.21 points or 1.08%.

• Spain’s Ibex: 19,039.30, down 287.00 points or 1.49%.

• Italy’s FTSE MIB: 49,086.28, down 770.89 points or 1.55%.

Following the advances of last week, the start of the new week saw sellers take control.

European government bond yields rose, with France showing the most pronounced increase.

The benchmark 10-year yields across Europe climbed, and France was at the forefront:

• Germany: 3.456%, up 3.6 basis points.

• France: 4.940%, up 8.6 basis points.

• UK: 5.443%, up 3.9 basis points.

• Spain: 4.080%, up 3.0 basis points.

• Italy: 4.582%, up 5.0 basis points.

The rise in French yields was particularly notable, increasing five basis points more than Germany's and thereby widening the gap between them. France's 10-year yield is close to levels not seen since May 2002.

A crucial budget vote is due in France on Tuesday. The National Assembly will vote on the first portion of the budget bill, which concerns government revenues, following a question session. The final vote on the entire budget is set for November 17.

The vote on Tuesday is seen as a key test of the government's capacity to achieve fiscal consolidation. A trouble-free vote would provide some relief and support the euro, whereas a failure or significant concessions that undermine the deficit-cutting strategy could add pressure on French bonds and the euro.

US equities bounced back, driven by gains in the Nasdaq.

While European markets were closing, US stocks moved higher, led by the Nasdaq indexes. The Dow Jones Industrial Average was little changed, reflecting the tech sector's outperformance.

Current readings were:

• Dow industrial average: 52,010.19, up 2.98 points or 0.01%.

• S&P 500: 7,708.59, up 49.15 points or 0.64%.

• Nasdaq Composite: 26,523.44, up 383.41 points or 1.47%.

• Nasdaq 100: 29,671.88, up 484.34 points or 1.66%.

• Russell 2000: 2,734.95, up 13.58 points or 0.50%.

Following last week's tech-driven sell-off, buyers attempted a recovery. The Nasdaq 100 was at the forefront, but a single strong session is just the beginning. Investors now require sustained buying to confirm the rebound has further potential.

US Treasury bonds also saw yields rise at the time of the snapshot:

• 2-year: 4.776%, up 4.0 basis points.

• 5-year: 4.942%, up 4.3 basis points.

• 10-year: 5.138%, up 4.0 basis points.

• 30-year: 5.471%, up 3.4 basis points.

The benchmark 10-year yield touched 5.365% last week, its highest since March 2002.

US homebuilders are under strain.

The NAHB housing market index registered 29, well under the 50 mark that distinguishes positive from negative builder sentiment.

All three sub-indexes showed declines:

• Current sales fell to 33 from 35.

• Expected sales over the next six months fell to 32 from 37.

• Prospective buyer traffic fell to 18 from 23.

Builders are making greater efforts to attract buyers. In October, 43% of builders reduced prices, the highest share recorded over the 2020–2026 timeframe. The average price cut held at 6%, while 65% provided sales incentives.

The takeaway is that affordability is still a challenge. Despite price cuts and incentives, buyer traffic keeps declining.

Canadian inflation data showed a hotter energy component but cooler core measures.

Canada's consumer price index for September climbed 3.1% from a year ago, compared to a 3.2% forecast and a 3.0% prior reading. On a monthly basis, prices rose 0.1%, under the 0.2% expectation.

Although the headline rate picked up, the underlying figures were more positive:

• CPI-median eased to 1.9% from 2.0%.

• CPI-trim slowed to 1.8% from 1.9%.

• CPI-common declined to 2.4% from 2.6%.

• Inflation excluding gasoline slowed to 2.2% from 2.4%.

• Grocery inflation eased to 1.7% from 2.8%.

Energy continues to be the trouble spot, with annual price increases of 19.0% overall and 27.8% for gasoline.

The softer core numbers reduce the urgency for the Bank of Canada to hike rates. Immediately after the release, USDCAD moved from about 1.4075 to 1.4106. By the time European markets closed, it was around 1.4096, still 0.29% lower on the day.

The dollar had a mixed performance, while gold and crude oil declined.

The greenback gained versus the euro, yen, pound and Swiss franc but fell against the Canadian, Australian and New Zealand dollars:

• EURUSD: 1.1204, down 0.31%.

• USDJPY: 158.51, up 0.33%.

• GBPUSD: 1.3300, down 0.21%.

• USDCHF: 0.8268, up 0.35%.

• USDCAD: 1.4096, down 0.29%.

• AUDUSD: 0.6975, up 0.45%.

• NZDUSD: 0.5659, up 0.16%.

Elsewhere in markets:

• Crude oil: $98.64, down $0.41 or 0.41%.

• Gold: $4,140.03, down about $25.10 or 0.60%.

• Silver: $57.16, up $0.185 or 0.32%.

• Bitcoin: $81,660, down $342 or 0.42%.

Gold fell as Treasury yields rose, while silver posted a slight gain. For European stock investors, the robust end to last week gave way to widespread selling at the start of this week.