Stocks swept lower as bond rout rocks markets

Thu May 7, 2015 7:46am EDT
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By Marc Jones

LONDON (Reuters) - World financial markets were unsettled again on Thursday as a week-long sell-off in benchmark government bonds, stocks and the dollar and a race up in oil prices showed little sign of relenting.

Nerves were still jangling in Europe and shares and bonds suffered another pounding on fears the recent surge in yields, the euro and energy costs could snuff out the only recently-formed hopes of a solid euro zone recovery.

The regional FTSEurofirst was led down for a third straight day by falls of as much as 1.2 and 1.8 percent for Germany's Dax and France's CAC 40 as the euro hit its highest level since February.

Bond markets were at the centre of the rout as more heavy blows for Germany's normally rock-solid Bunds put them on course for their biggest weekly spike in yields in over a decade.

Italian and Spanish yields hit 2 percent for the first time this year, French ones topped 1 percent and U.S. Treasuries, the benchmark for borrowing costs globally, briefly broke 2.3 percent. [EUR/GVD]

"There has been a massive repositioning over the last 10 days and it is still ongoing," said Philippe Gudin de Vallerin, head of euro research at Barclays in Paris.

"Some sales people say there has been major selling from Asia, but from a fundamental point of view the move has certainly been excessive. It is difficult to understand."

Wall Street was expected to start around 0.5 percent lower. London's FTSE, Europe's biggest share market, meanwhile, was down 1.3 percent, with attention also on the day's national election that remained too close to call.   Continued...

An employee of the Tokyo Stock Exchange (TSE) looks at a stock quotation board as he works at the bourse at TSE in Tokyo March 13, 2015. REUTERS/Yuya Shino