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FTSE rises as trauma from bund auction lingers

by Max Julius on Nov 24, 2011 at 09:28

Britain’s FTSE 100 inched up on Thursday, halting an eight-day losing streak, in the aftermath of an unsuccessful German debt auction that triggered fears that the eurozone’s debt crisis was penetrating its biggest economy.

The UK index of blue-chip shares added 0.29%, or 15 points, to 5,155 and the All Share index improved 0.32%, or nine points, to 2,656.

‘Yesterday’s buyer’s strike for German bunds sent chills of fear through Europe as investors saw the first signs that Germany was exhibiting the initial signs of contagion from Europe’s debt crisis,’ said Michael Hewson, market analyst at CMC markets.

He added: ‘It also begs the question that if the strongest economy in Europe can’t shift 10-year bonds, what does that mean for everyone else in Europe trying to raise funds in the open market?’

The yield, or implied interest rate, on benchmark 10-year German bunds rose further, climbing seven basis points to 2.17%, after hitting a one-month high of 2.18% earlier in the day. However, French, Italian and Spanish borrowing costs eased, in a more positive signal for the eurozone’s other biggest economies.

Core contagion: Click to enlarge

The chart shows yields on 10-year bunds from the start of October to Thursday morning. Source: Reuters

Stock markets elsewhere in Europe also bounced: Germany’s DAX index gained 0.93% to 5,509, France's CAC 40 index strengthened 1.16% to 2,855, and the FTSEurofirst 300 index of top European shares rose 0.61% to 908.

Commodities prices staged a light recovery, with Brent crude oil for delivery in December hardening 0.55% to $107.61 per barrel, but concerns over the global economy persisted.