LONDON Feb 24 Europe's stocks benchmark fell
more than 1 percent on Friday while German and French indexes
slid by their most in nearly 5 months as jitters in the bond
markets over political risk looked to have spilled over into
Futures on the European bluechips index fell 1.4
percent with traders pointing to a bout of selling in the
afternoon session as a reason that exacerbated earlier weakness
in stock markets.
Banks and commodity-related sectors led losses across Europe
following a slump in metals prices overnight, subdued forecasts
from the likes of BASF and weak results from Standard
Chartered and Royal Bank of Scotland.
The STOXX 600 was down 1.2 percent in afternoon
trading and was poised for its third straight session of losses.
"Political uncertainty is the only explanation. The
French-German government bond spread is widening," an equity
sales trader at a European bank said.
European banks, the sector most sensitive to bond
spreads, fell more than 2 percent while the basic resources
slid more than 3 percent.
Both sectors have been among the biggest beneficiaries of
the "reflation rally" that has lifted world stocks to record
highs and which has favoured shares of companies more geared to
growth and inflation.
Meanwhile, UBS warned on Friday that French stocks appeared
"too relaxed" given the impact that uncertainty around the
election has had on government bonds.
"(French equities) rode the cyclical rally in H2-16 and
turned a blind eye to the jump in the OAT spread," said
strategists at UBS in a note, referring to the extra return
demanded by investors to hold French rather than German debt.
(Reporting by Helen Reid, Editing by Vikram Subhedar)