European stocks closed higher again Monday but gains were limited as the continued turmoil in government bond markets blunted momentum in the global "Trump Rally."
Investors are continuing to bet that President-elect Donald Trump will unleash the biggest peacetime stimulus since the Second World War soon after he assumes office in January, with the resultant inflationary aftermath of his $9.5 trillion tax overhaul hitting bond markets all over the world.
The volatility seen Monday in Italy's government bond market -- which, with more than €2.2 trillion in outstanding, is the third-largest in the world - is a case-in-point. Benchmark 10-year bond yields raced past a 52-week high to trade at 2.2%, taking the extra yield, or spread, that investors demand to hold Italian government debt instead of triple-A rated German bunds to 1.82% - a two-year high and a 20 basis point increase from Friday.
Yields on Italy's debt maturing in 30 years, the most sensitive to interest rate movements, rose 20 basis points in Monday trading to 3.34%, the highest since July 2015.
In fact, Italy's bank-heavy FTSE-MIB index was the only major European bourse to end the day in negative territory, falling 0.3% to 16,705.6 points.
Elsewhere, 10-year German government bond yields touched a nine-month high of 0.38% Monday, extending a two-week stretch of declines that has effectively doubled the benchmark European borrowing rate, before paring losses to 0.33%. U.K. government bonds, known as Gilts, also touched multi-month highs, with 10-year yields trading at a six-month high of 1.49%.
Amidst the bond market turmoil, Britain's FTSE 100 added around 0.6% on the session, with similar percentage gains seen for benchmarks in Germany and France, as European equities followed along in the wake of yet another intra-day high for of 18,933.40 the Dow Jones Industrial Average. The U.S. dollar index, a measure of the greenback's strength against a basket of global currencies, hit a 52-week high of 100.20 during late European trading.
Financial stocks were again the main advancers for all three major indices as subset of Europe's largest lenders, the Stoxx 600 Bank Index, rose 2.2% to a nine-month high of 160.70.
Oil prices were another major part of the session's trading, as benchmark crude prices remain under heavy selling pressure amid a glut of global supply and fading prospects of an agreement to freeze production later this month at OPEC's general meeting in Vienna. December delivery prices for Nymex crude fell 1.5% to $43.20 while similarly-date prices for Brent crude, the global benchmark, slipped 1.4% to $44.74.