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Europe Markets: German key bund yield turns positive for the first time in three years

Germany’s key 10-year bund yield on Wednesday turned positive for the first time in three years, tracking a continued selloff in U.S. Treasurys in anticipation of Federal Reserve tightening this year to combat rising inflation.

The yield TMBMKDE-10Y, 0.009% rose 2 basis points to 0.01%. Yields move in the opposite direction to prices.

While the European Central Bank hasn’t indicated near-term rate increases, global bonds have chased the 10-year Treasury note TMUBMUSD10Y, 1.887%, which many expect will soon bust through 2%, a level not seen since early 2019, as it hovered around 1.89%.

Bank of France Governor François Villeroy de Galhau reportedly said Wednesday that the European Central Bank has the “resolve and the capacity to quickly adapt our monetary policy,” if rising inflation in the region proves stickier.

U.K. inflation data, meanwhile, showed an annual rise in December to 5.4%, the highest in nearly three decades. The 10-year U.K. gilt TMBMKGB-10Y, 1.264% was up 4 basis points at 1.26%, a level also not seen since 2019. The Bank of England delivered a shock to markets in December as it became one of the first major central banks to raise interest rates.

As for equities, the Stoxx Europe SXXP, +0.28% steadied at 479.89, after a near 1% tumble on Tuesday, in step with a sharp rout on Wall Street. U.S. equity futures ES00, +0.16% YM00, +0.09% NQ00, +0.30% erased deeper losses to trade mostly steady. The German DAX DAX, +0.18% and FTSE 100 UKX, +0.09% were flat, while the French CAC 40 PX1, +0.63% rose 0.3%.

A fresh batch of earnings were also garnering some attention. Shares of Cie. Financière Richemont  CFR, +9.28% were a top Stoxx gainer, climbing 8% after the company reported total sales of €5.66 billion ($6.41 billion), beating analysts’ expectations for €5.08 billion. Its core jewelry Maisons unit was a big driver of sales.

Burberry shares BRBY, +6.29% weren’t far behind, up nearly 5%, after the luxury retailer reported higher retail and same-store sales in the third quarter of fiscal 2022 as it benefited from strong growth in China and the Americas, from new and younger customers. The British luxury-goods company left its medium-term guidance unchanged.

Gains in the luxury sector boosted shares of French heavyweight LVMH Moët Hennessy Louis Vuitton MC, +3.25%, with those shares up 2.7%.

Shares of ASML Holding ASML, -3.94% rose 1.2%, after the Dutch semiconductor-equipment maker reported better-than-forecast fourth-quarter earnings of €1.77 billion ($2.01 billion) and revenue of €5 billion. ASML expects 2022 net sales will rise 20% this year versus 2021, which the company said includes the expected impact of a fire at its Berlin site at the start of the year. Its 2021 dividend was doubled to €5.50.

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