Europe midday: Banks track gains in US bond yields, Italian deputy PM warns EU
Stocks on the Continent are paring their earlier losses helped by gains in banks on the back of Thursday's steepening in the US Treasury curve on the back of stronger-than-expected economic data in the States and a very positive assessment of the US economy from the head of the Federal Reserve.
Greek debt markets were also in the spotlight, albeit for different reasons.
Speaking at an event hosted by The Atlantic magazine and the Aspen Institute, US central bank chief, Jerome Powell, defended that a gradual path of interest rate hikes was the best way to move forward but also said America was experiencing "a remarkably positive set of economic circumstances."
Four other top Fed officials who also made policy-relevant remarks on Wednesday evening had sounded a more mixed set of views.
Nevertheless, the yield on the US 'Long Bond' as the US Treasury's 30-year bond is called, snapped higher by 12 basis points to 3.34%, breaking out to a four-year high and the Treasury yield curve steepened back out to 33 basis points, even as the market-implied odds of another Fed hike in December jumped o roughly 82%, according to the CME's Fed Watch tool.
Against that backdrop, as of 1235 BST the benchmark Stoxx 600 was down by 0.63% or 2.41 points to 381.43, alongside a drop of 0.63% or 2.42 points to 5,445.42 for the Cac-40 and a retreat of 0.25% or 54.30 points to 20,681.93 on the FTSE Mibtel.
One bright spot however were lenders' shares, with the corresponding Stoxx 600 sector gauge gaining 0.77% or 1.19 points to 155.96.
Germany's Dax was an outlier, edging up by 0.05% or 6.64 points to 12,294.53, boosted by a sharp drop overnight in the euro and after having missed out on Wednesday's gains in shares across the Continent.
In parallel, euro area government debt markets were reacting calmly - outside of Greece - to the ructions in US debt markets overnight, with Italian and Spanish 10-year government notes trading only slightly lower, although they did come under greater selling pressure at the opening bell.
Italian bonds appeared to be relatively well-behaved despite remarks from deputy prime minister, Matteo Salvini, who told state radio RAI that the country would not change its deficit targets even if the risk premium on its sovereign debt hit 400 basis points.
Greek 10-year bond yields were also better behaved, paring an earlier 16 basis point rise to stand nine basis points higher at 4.50%. On Monday, Athens lifted the restrictions on bank withdrawals which had been imposed in 2015.
To take note of as well, on Thursday an advocate general of the European Court of Justice was expected to issue an opinion on the legality of the European Central Bank's Public Sector Purchase Programme in the form of a non-binding statement, analysts at UniCredit Research pointed out.
For later in the day, markets will be keeping an eye out for the latest weekly jobless claims figures Stateside, at 1330 BST, followed by factory orders figures at 1500 BST.
ECB governing council member Ewald Nowotny was set to deliver a speech on financial market development, in Vienna, at 1430 BST.
On the corporate front, Banca Monte dei Paschi di Siena is in talks to sell its Belgian arm to Warburg Pincus, Bloomberg reported citing people familiar with the matter.