Europe midday: Stocks at session lows as MPC lights bond fire

Stocks are bouncing along near their lows of the session amid steep selling in government bonds around the world stoked by a hawkish sounding Monetary Policy Committee.

Commenting on the content of Governor Mark Carney's press conference earlier, Andrew Goodwin, lead UK economist at Oxford Economics, said: "It is clear that, absent a downside shock, the MPC is now set on a path of steady policy normalisation to the extent that, even though we expect inflation to slow more markedly than the Bank expects this year, we now think that the Committee will hike again in November."

Against that backdrop, as of 1433 GMT, the benchmark Stoxx 600 was down by 0.57% or 2.18 points to 377.95, alongside a fall of 1.25% or 157.43 points for the German Dax to 12,433.88 and a 1.28% or 281.98 drop on the FSTE Mibtel to 22,706.72.

Volatility on the Euro Stoxx 50 was holding higher as well, with the VStoxx gauge up by 14.69% to 24.50.

In parallel, the yield on the 10-year German bund was six basis points higher to 0.80%, alongside an even larger 10 basis point move in that on similarly-dated Gilts.

Tracking gains in Bund yields, euro/dollar had reversed course to edge 0.06% higher to 1.2266.

Stateside, yields on 10-year Treasuries were also pushing higher, rising four basis points to 2.87%.

Overnight, US Senate leaders reached a two-year bipartisan spending bill overnight, with the House of Representatives due to vote on it on Thursday.

Elsewhere on the economic front, and central bank speakers aside, Spain's industrial production jumped by 0.9% on the month in December (consensus: -0.2%), INE said.

Meanwhile, in Germany, the Ministry of Finance reported a drop in the country's seasonally adjusted trade surplus from €22.3bn in November to €21.5bn for December (consensus: €22.3bn) as imports jumped by 1.4% versus the month before.

On the corporate side of things, Denmark's TDC was catapulted 14% higher by news of an unsolicited takeover bid from three pension funds and Macquarie.

Elsewhere, Brazilian competition authorities gave Bayer the 'all clear' to proceed with the acquisition of US rival Monsanto.

Germany's Commerzbank was also in focus after the lender said it was aiming to return to a dividend payout in the current year and posted modestly better-than-expected fourth quarter revenues of €2.19bn.

Stronger-than-expected earnings were behind a rise in Pernod Ricard shares after the spirits-maker reported stronger demand from China and India as well as at its travel retail division.

Going the other way, Airbus stock was still moving lower after disclosing it may incur in additional write-offs linked to its trouble-prone A400M military cargo aircraft.