Euro zone bond yields up, but eyes on US moves against Russia and China

By Joice Alves

LONDON, Oct 23 (Reuters) - Euro zone government bond yields edged up on Thursday, shrugging off U.S. President Donald Trump's move to impose sanctions on Russia and consider more trade restrictions on China, as the recent flight to safe-haven assets eased.

Trump on Wednesday hit Russian oil companies Lukoil and Rosneft with sanctions as his frustration grows over Moscow's war in Ukraine. The move came after European Union countries on Wednesday approved a 19th package of sanctions on Russia.

The Trump administration is also considering a potential escalation of its trade war with China, with a plan to curb an array of software-powered exports to China to retaliate against Beijing's latest round of rare earth export restrictions.

FOCUS ALSO TURNING TO US INFLATION DATA

Focus this week is also on the U.S. consumer price index report, due on Friday after a delay due to the government shutdown. It is expected to show that core inflation held at 3.1% in September.

Germany's 10-year bond yield DE10YT=RR, the benchmark for the euro zone, rose 1.7 basis points to 2.57%. Italy's 10-year yield IT10YT=RR was up 1 bp at 3.36%.

This left the gap between Italian and German bonds DE10IT10=RR at 76 bps, the narrowest since around April 2010, according to LSEG Datastream data.

Germany's two-year yield DE2YT=RR, which is more sensitive to European Central Bank rate expectations, was little changed at 1.92%.