Europe midday: Stoxx gains on falling bond yields, US-Iran talk hopes

(Sharecast News) - European shares were higher on Friday on reports the US and Iran were in talks on a possible phased re-opening of the Strait of Hormuz while falling bond yields also boosted sentiment.

The pan-regional Stoxx 600 index was up 0.47% to 639 at 1045 GMT with all major bourses higher. Brent crude fell slightly to $105 a barrel as traders remained sceptical that either side could agree a deal to open the vital waterway.

US and Iranian negotiators in New York were reportedly exploring a phased path out of war that would involve Tehran reopening the Strait of Hormuz and Washington lifting its economic blockade of Iran.

European bond yields are falling as we reach the end of the week. UK Gilt yields are leading the declines and the 2-year Gilt yield is down more than 6bps so far today," said XTB research director Kathleen Brooks.

"Yields are falling along with the oil price, the Brent crude price is lower by 0.3% this morning, which is a fairly mild decline considering that there is growing optimism that a diplomatic deal will be reached between the US and Iran to allow a full reopening of the Strait of Hormuz."

The decline in gilt yields has boosted the mood in equity markets, European markets are higher across the board, and in the US, futures prices are pointing to a higher open later on Friday."

In economic news, consumer sentiment across Germany suffered a "significant setback" this month, according to the NIM Consumer Climate survey powered by GfK, as rising energy prices dampened income expectations.

The forward-looking consumer climate indicator for October fell 3.8 points to -30.6 points, GfK announced on Friday.

Analysts had expected a smaller decline to -27.4 from a revised -26.8 the month before, with the index reaching its lowest level since May.

The income expectations indicator dropped sharply, by 16.7 points to -15.0, falling to its lowest since April shortly before the introduction of the fuel rebate - a tax-free relief bonus and a fuel discount for May and June.

"The majority of households expect high energy prices to reduce their purchasing power," said Rolf Bürkl, head of consumer climate at NIM. "As a result, they are more sceptical about their income expectations for the next 12 months."

On the equities front, oil majors fell in line with the slightly weaker oil price, with Aker BP, Galp, Equinor and Var Energi all lower.

Reporting by Frank Prenesti for Sharecast.com