July 1, 2019 / 7:01 AM / 21 days ago

No direction on EU top jobs but trade talk progress lifts EZ bond yields

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr

By Virginia Furness

LONDON, July 1 (Reuters) - With no indication of who will take European Union jobs after a long night of wrangling, euro zone government bonds took direction from improved risk appetite after the United States and China agreed on Saturday to restart trade talks.

Despite all-night negotiations in Brussels, as day broke on Monday there was still no deal on who should lead its executive as political groups jockeyed for influence.

Dutch socialist Frans Timmermans had emerged as the favourite to replace Jean-Claude Junker as president of the European Commission, but this was met with opposition from eastern European states, as well as the centre-right European People’s Party bloc. As such bilateral talks are ongoing.

German 10-year bond yields were just over a basis point higher in early trade at -0.313%, while other 10-year yields in the bloc were flat to one basis point higher.

Longer dated bunds had sold off the most, with yields up three basis points in early trade to 0.29%.

The big reveal for the European Central Bank presidency is likely to come at a later date but the nationality of the new Commission head will offer big clues at least on where the next ECB boss will come from.

A German at the helm of the Commission should mean Bundesbank head Jens Weidmann, a known hawk feared by market participants, will not get the ECB role. Likewise a commission presidency for France would rule out French ECB candidate Francois Villeroy de Galhau. So Finland’s Ollie Rehn stands out as the likely compromise.

Meanwhile, trade talks between the U.S. and China have resumed, though analysts at ING warned on Monday that caution is still warranted.

“The sticking points that have previously led to a breakdown of talks remain unaddressed,” wrote senior rates strategist Benjamin Schroeder in a note.

European stock futures hit their highest level since August 2018 as investors piled into assets considered riskier after Washington and Beijing agreed to resume trade talks, averting an escalation of a protracted dispute.

President Donald Trump offered concessions including no new tariffs and an easing of restrictions on tech company Huawei in order to reduce tensions with Beijing.

Italian government bond yields meanwhile were flat on the day ahead of an expected decision by the European Commission whether it will take action over Rome’s debt levels. (Reporting by Virginia Furness Editing by Raissa Kasolowsky)

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