Choppy trading for UK stocks as German Ifo beats forecasts but Spanish yields rise

UK and European stocks saw losses on Friday as a 0.2% rise in the mining sector was offset by a 1.7% fall in oil and gas stocks with risk appetite cooled by rising Spanish bond yields despite a surprising rise in a German business confidence measure.

The FTSE 100 had rallied five points after the first hour of trading whilst the German DAX and French CAC traded between flat and small gains. But by late morning trade all three European Indices traded in negative territory between losses of 0.2% and 0.5%.

The German Ifo business sentiment index for March was a bit of a surprise this morning. Business climate rose to 109.9 from 109.9 against expectations of a fall to 109.5. Business conditions rose to 117.5 from 117.4 when a fall had been expected and expectations – the forward looking segment of the data – remained flat at 102.7 when a fall to 102.5 had been expected.

UK retail sales also shocked this morning to come in much better than expected. UK retail sales grew 1.8% in March vs expectations of 0.5%, whilst sales grew 3.3% on an annual basis vs 1.4% expected. The data gave retail stocks listed in London an immediate lift, though any lift in demand was tempered some 15 minutes after the data was released, giving stocks a knee jerk effect lift temporarily.

The lift given to stocks and risk appetite in general from better than expected business sentiment data out of Germany and UK retail sales was however short lived for European stock markets as the morning progressed.

Benchmark 10-year Spanish bond yields raced back to the 6% level however and this kept most European stock gains fragile to reversal and trading choppy.

There is no other major economic data due out for the remainder of the European trading session and so the focus for the rest of the session will be portfolio protection ahead of the weekend and the earnings release of bellwether US stock General Electric before the open of the US trading session.