Euro zone bonds steady; investors await inflation and GDP data

• Investor attention will turn to "flash" or first estimate euro zone inflation and GDP numbers due at 1000 GMT.
• The inflation figure is expected to rise to 1.4pc from 1.3pc last month, while GDP growth is expected to slow to 1.1pc from 1.2pc.
• The releases follow an unexpected contraction in French economic growth during the fourth quarter.

LONDON: Euro zone government bond yields held steady near three-month lows in early Friday trade as coronavirus fears remained in focus.

The United States warned Americans not to travel to China as the death toll from the new virus reached 213 and the World Health Organization (WHO) declared a global health emergency.

A growing number of airlines are suspending flights to China to halt the spread of the virus, stoking fears of a blow to global economic growth and boosting safe-haven government bonds.

"The length of the flight suspensions to China by global carriers, some stretching into March, gives an idea of the expected period of economic disruption. This does not mean that market focus will be on the epidemic for this long," ING strategists said in a client note.

"A slowdown in the rate of confirmed cases would be greeted with relief. This relief would not necessarily entail a return to interest rates levels prevailing at the start of the year however," they added.

Most 10-year bond yields were unchanged on the day, with Germany's 10-year yield at -0.40pc, near three-month lows hit on Thursday.

Investor attention will turn to "flash" or first estimate euro zone inflation and GDP numbers due at 1000 GMT.

The inflation figure is expected to rise to 1.4pc from 1.3pc last month, while GDP growth is expected to slow to 1.1pc from 1.2pc, according to a Reuters poll.

A pick-up in inflation numbers since November - alongside healthier business activity surveys - has stoked some optimism that the worst may be over for the euro zone economy.

The releases follow an unexpected contraction in French economic growth during the fourth quarter, as manufacturing output slumped in the face of strikes over an unpopular pension reform and German inflation numbers, which came in slightly lower than expected.