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Valentine's Day GDP figures lift Europe's hopes of economic recovery

| Tradeweb

GDP growth for the 28 countries forming the European Union has gathered pace, according to Q4 2013 flash estimates released today by Eurostat. EU GDP rose by 0.4% in the fourth quarter of last year, compared to third quarter’s 0.3%. This data, combined with an increase of 0.1% for the whole of 2013, was interpreted by analysts as a step closer to economic recovery.

Similar figures for France, Germany and Italy were equally positive. INSEE data reveals that the French economy grew by 0.3% in Q4 2013 and over the year, after stagnating in 2012. German GDP expanded by 0.4% in Q4, according to Destatis.

Italy’s Istat estimates that the country’s GDP grew by 0.1% in the last quarter of 2013. However, throughout the year the economy contracted by 1.9%. Yesterday, Enrico Letta was ousted from his post as prime minister in a vote called by party rival Matteo Renzi. Mr. Renzi is now expected to take over the reins, provided he can secure sufficient support to form a coalition government, as there was no clear winner after last February’s parliamentary elections.

Year-to-date mid-yield data for countries in the EU seems to support a more upbeat sentiment, not just for core economies but for peripherals as well.

Yields for German ten-year debt rallied by 27.3 bps from January 2 to February 13, when comparing market close values on Tradeweb’s European government bond marketplace. France, whose credit rating was downgraded by Standard & Poor's in November, saw a more moderate drop of 8.5 bps.

Despite an unemployment rate of 28%, Greek ten-year government bond yields fell by 57.3 bps over the same time period. The biggest drop of 80.7 bps was recorded by Portugal, which hopes to exit its bailout program this May.