Europe midday: Shares extend gains as debt sell-off eases

(Sharecast News) - European stocks extended gains on Wednesday, after turmoil in the bond markets over fiscal stability in several countries started to ease slightly.

The pan-regional Stoxx 600 index was up 0.73% to 545. Germany's DAX was 0.77% higher and France's CAC 40 rose 0.99%.

Shares fell on Tuesday as bond yields fell amid concerns over the fiscal outlook in major European economies. Britain's 30-year bond yield hit its highest level since 1998 with investors nervous about a potential £20bn black hole in the country's finances.

France's 30-year yield was at its highest since 2009 ahead of a no confidence vote in the government over its budgetary plans, while US Treasury yields jumped Tuesday after a federal appeals court on Friday ruled that most of his President Donald Trump's tariffs were illegal - raising the prospect of the government having to repay duties already collected.

"The selloff in long-duration bonds is fuelled by several factors: concerns over ballooning sovereign debt, political hurdles to fiscal tightening (France is a case in point), and structurally higher inflation pressures following the Covid disruptions and the ongoing trade war," said Swissquote Bank analyst Ipek Ozkardeskaya.

"Investors are demanding higher returns to hold bonds exposed to both inflation risk and elevated debt levels. Higher yields, in turn, push up borrowing costs for companies and weigh on valuations. As a result, equities and corporate bonds also kicked off the week on a weak note."

The flight from equities meant that gold once again climbed to a new record high, with the spot price of reaching $3,546.99 an ounce. Investors seeking a safe haven have pushed the precious metal to fresh highs for six straight days.

In economic news, the eurozone economy expanded in August, a closely-watched survey showed on Wednesday, but at a sluggish pace that narrowly missed expectations.

The seasonally-adjusted HCOB Eurozone composite PMI output index was 51.0 last month, a 12-month high. However, August's print was up only marginally on July's 50.9, and narrowly missed expectations for 51.1.

On the equities front, Swedish electronics manufacturing firm Mycronic led the gainers while UK insurer and asset manager M&G fell as half-year profits missed estimates.

Lufthansa fell as Germany's VC pilots' union called for a strike after talks with the airline on its pension scheme collapsed.

Reporting by Frank Prenesti for Sharecast.com