Europe midday: Shares ease off lows but inflation, bond yield fears persist
European shares moved off morning lows but were still down at midday as worries over rising bond yields and inflation kept a lid on sentiment despite the increased pace of Covid vaccine rollouts.
The pan-European Stoxx 600 index was 0.67% lower at 1213 GMT, having been down more than 1% in early trade. All major regional bourses were tracking the trend, while Wall Street futures showed the Dow Jones opening 166 points lower and the Nasdaq down 169 points.
In Germany, business sentiment improved in February despite the Covid-19 lockdown, according to a survey released on Monday by the Ifo Institute.
The business climate index rose to 92.4 from an upwardly-revised 90.3 in January, beating expectations for a reading of 90.5.
IG analyst Joshua Mahony said the reading "served to highlight the growing optimism seen throughout Europe as vaccinations limit the time left until restrictions are limited".
"Nevertheless, with the Ifo current assessment lagging behind its forward-looking element, it remains to be seen whether traders wish to trade on hopes or the current reality."
"Inflation and rising treasury yields remain a key concern for investors, with a gradual rise in both providing a warning sign for equity markets. The inverse correlation between gold and Treasury yields serves to dampen the 2021 outlook for the precious metal, despite the bounce we have seen from seven-month lows today."
"Aside from precious metals, copper has been leading a drive higher for industrial metals in a move that could provide yet another underlying reason for higher inflation going forward."
Britain’s FTSE 100 was 0.61% lower as the government prepared to release details of its planned path out of Covid-19 lockdowns.
Weekend reports suggested schools would re-open from March 8, while people will be able to meet outside in groups of six from March 29, just in time for Easter.
"Those steps have been prioritised ahead of the re-opening of restaurants and non-essential retail, which will not occur until April (daily covid-19 numbers permitting),” said Spreadex analyst Connor Campbell.
“This delay to the retail re-opening helps explain why the FTSE and pound have both opened the week in the red. For while investors are no doubt happy the country is loosening the restrictions once again, the reality is they don’t hold positions in schools and picnics.”
Investors were also eyeing a speech from European Central Bank President Christine Lagarde’s on stability, economic co-ordination and governance in the EU later in the day.
In equity news, shares in security firm G4S fell 9.81% as Canada’s GardaWorld declared its improved 235p-per-share offer as final.
CMC Markets analyst Michael Hewson said the news about GardaWorld had disappointed those shareholders who were holding out for a better offer than the 245p-a-share offer from rival Allied Universal.
"G4S has been a business that has seen its fair share of problems over the past three years, its share price down sharply from the record highs seen back in July 2017. Last year the company reported a £91m loss after writing down the value of its cash handling business, and has also been involved in a number of incidents that have damaged its credibility," he said.
"The shareholder hold-outs need to accept that they are unlikely to wring any more out of this particular bid, and accept the money on the table now."
Pub group Mitchells & Butlers nudged lower after saying it had been burning up to £35m in cash a month since the start of the year as it launched a £351m placing to bolster its balance sheet from the coronavirus pandemic.
IAG was in focus after saying it had boosted total liquidity by £2.45bn, via a loan deal and deferred pension deficit payments to help it weather the pandemic.