* Weak German, French data stalls German Bund selloff
* Limited recovery hints at underlying risk-appetite
* Technical charts point to fresh losses for Bunds
By William James
LONDON, Feb 14 (Reuters) - German bond futures rose slightly on Thursday, recovering after a fall in the previous session as growth data from the region’s two largest economies came in weaker than forecast.
Both German and French gross domestic product data for the final quarter of last year came in slightly below expectations lending support to less-risky assets and curbing enthusiasm for higher-yielding bonds.
German Bund futures were 6 ticks higher on the day at 142.11, with analysts targeting a further rise if remaining data comes in weak.
“(It) requires a substantial upside surprise at today’s GDP release to induce the market to further increase its growth projections. On balance Bunds might thus benefit if the release falls short of consensus expectations,” Commerzbank strategists said in a note.
Italian GDP data is due at 0900 GMT followed by the figure for the whole euro zone at 1000 GMT. The data is expected to show the bloc contracted 0.4 percent in the last quarter of 2012.
However, the relatively small size of the Bund futures gain caused by the French and German data indicated the market’s underlying optimistic tone, and signalled that the appetite for more risky investments may not be exhausted just yet.
“The danger is that the market looks at the data and says it’s backward looking and that things have got better since then. Given current sentiment they might ultimately discount a weak number,” a trader said.
Italian and Spanish bonds have performed strongly this week, and Italy was able to complete its first sale of 30-year debt in nearly two years on Wednesday.
This left the Bund future vulnerable to further falls, which could be exacerbated by any breach of technical chart levels.
A close below 141.90 would probably be enough to turn momentum indicators negative, said UBS technical analyst Richard Adcock, triggering a fresh trade recommendation targeting a fall to 140.20 over the next few days.