LONDON (ShareCast) - Better than expected US durable goods data restored confidence in US equities and left government bonds out in the cold.

A 0.8% leap in US durable goods orders in June took the market by surprise as new orders for motor vehicles rose the most in 11 months. Economists, who had predicted a fall of 0.4%, were left scratching their heads as factory orders soared at their fastest pace since February’s 1.1% improvement.

An unexpected rise in the Reuters/University of Michigan index of consumer sentiment also rekindled investors’ appetite for risk.

The yield on the benchmark 10-year Treasury note rose 6 basis points to 4.05%.

In contrast, bond prices on the other side of the Atlantic were on the up.

European bonds rose as traders trimmed their bets on the European Central Bank raising its key lending rate for a second time this year.

The yield on the 10-year bund was little changed but at the shorter end of market the yield on two-year bunds fell one tick to 4.42%.

In the UK, gilt prices were firmer still in the wake of a slow-down in GDP.

The housing slowdown and weaker consumer spending resulted in the lowest quarter-on-quarter economic growth in the UK for three years.

The Office for National Statistics (ONS) said GDP grew 0.2% in the second quarter, having risen 1.6% in the same quarter last year, and down from the 0.3% growth in the first quarter.

Annual pace of expansion was reduced to 1.6% in the quarter, versus 2.3% in the first quarter.

The yield on the benchmark 10-year gilt fell three basis points to 4.95%.

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