Europe’s seismic markets in charts

Stock indices’ year-to-date losses hit double figures and bond yields at record lows
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Financial stocks are leading a rout on European equities markets, with many of the region’s main national indices showing double-digit losses for the year.

Meanwhile, haven demand is pushing yields on government bonds — which move inversely to prices — to record lows.

Two-year German government debt fell 3 basis points to reach minus 0.54 per cent. The yield on 10-year UK Gilts is down 10 basis points at 1.31 per cent, as investors seek income wherever they can find it.

Wider haven assets are also in demand, with gold at its highest level since May and the yen at its strongest level against the dollar in 14 months.

The dizzying trading comes as fears deepen about what the growing trend for negative interest rates means for the health of the financial system and the outlook for financial stocks. It came on the day Sweden’s central bank took its rate deeper into negative territory than expected in a move timed before March’s meeting of the European Central Bank, when even looser monetary policy is expected to be adopted in the eurozone.

The outlook adds to the pressure already faced by the financial sector since the start of the year from worries about its exposure to faltering global growth.

The sub-index tracking European financials is down 21 per cent this year at 53.5 and yesterday touched its lowest point since December 2012.

Banca Monte dei Paschi, down over 60 per cent year-to-date, is among a host of Italian banks dragging the index down. France’s Société Générale added to the year’s losses on Wednesday, shedding over 14 per cent after its earnings fell well short of forecasts.

Italy’s FTSE MIB is making the biggest decline among national European indices — down 5.1 per cent — taking its year-to-date loss to almost 26 per cent, after its outperformance over 2015 left it looking all the more vulnerable to the turn in sentiment.

The region’s main national indices are significantly lower, with losses over the year to date moving further into double digits.

The effects are being felt across Europe, with eurozone periphery bonds suffering. Portuguese 10-year bonds have had their biggest daily and weekly losses since 2012, with yields up 34bp on Thursday.

Reporting by Michael Hunter, Paul McClean and Jamie Chisholm in London

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