European stocks surge higher

By AFP

But despite this political shock, which would normally be expected to weigh down French stocks and push up bond yields, the French markets were buoyed by comments from the head of the European Central Bank, Mario Draghi.

The interest or yield indicated by French 10-year bonds already issued and traded on the secondary market fell to 1. 309 per cent.

The yield on the 10-year German bond, the benchmark for the eurozone, fell to a record-low level of 0. 944 per cent before recoiling slightly to 0. 947 per cent.

France, already on the back foot because of sluggish economic activity which has just forced the Socialist government to halve its growth outlook for the year to 0. 5 per cent, was hit by a new political crisis as markets opened.

At brokers Credit Agricole CIB, economist Frederik Ducrozet said that the fall in the French bond yield could appear "counter intuitive", given the government crisis.

European stock markets made up for last week's disappointing end, with Frankfurt's main DAX index finishing up 1. 83 per cent to 9,510. 14 points.

French bonds and stocks stood firm in the face of a government collapse, and German markets were also in good form while London markets were closed for a holiday.

But he also reassured markets that the bank would ensure deflation — a dangerous cycle of falling prices, which can stifle growth — did not take hold, implying a possible injection of funds into the eurozone economy.

Read more here: Business Spectator

    

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