European shares fell on Tuesday, pressured by a fresh rise in government bond yields, while euro zone inflation data reinforced expectations that the European Central Bank will raise interest rates next week.
The pan-European STOXX 600 slipped 0.6% to a more than one-month low of 647.08.
Britain’s FTSE 100 eased 0.3% as trading resumed
after Monday’s public holiday, while Germany’s DAX
slipped 1.1% and France’s CAC 40 fell 0.4%.
Euro zone government bond yields climbed to fresh multi-year
highs as Europe joined a global bond selloff and data showed
inflation rose above 3% in August, driven by higher energy
costs. That strengthened expectations the European Central Bank
will raise interest rates next week.
Traders expect a 25-basis-point rate hike, LSEG data showed.
Germany’s 30-year government bond yield earlier
hit a 15-year high, while France’s 30-year yield
climbed to its highest level since 2008.
European natural gas prices have surged in recent days, with
Dutch and British benchmark contracts rising after the first
direct exchange of attacks between the U.S. and Iran in a month
renewed fears of prolonged supply disruptions.
“After a long focus on equities and the income they provide,
there is now a much more compelling case to look at bonds for
retail investors to provide diversification, especially as
equities begin to dread the prospect of rate hikes around the
globe and the return of inflationary pressures,” said Chris
Beauchamp, chief market analyst at IG.
Hawkish comments from Federal Reserve Chair Kevin Warsh last
week, alongside higher energy prices, have prompted investors to
price in further rate increases from major central banks.
Euro zone manufacturing activity grew at its fastest pace in
more than four years in August, driven by the strongest rise in
new orders since early 2022 and robust output growth, an SP
Global survey showed.
Signs of economic resilience and strong corporate earnings
helped lift the STOXX 600 to a record high in early August, but
the index has since lost about 2%.
Energy stocks rose 1.8% as Brent crude
traded above $92 a barrel.
Novartis jumped 6.3%, among the top gainers on the
STOXX 600, after the Swiss drugmaker said its oral multiple
sclerosis drug remibrutinib met the main goals in two late-stage
trials and outperformed a rival treatment.
Reckitt Benckiser Group added 4.4% after a U.S. jury
sided with its Mead Johnson unit in a lawsuit alleging its
Enfamil preterm baby formula caused a serious bowel disease.
Partners Group shed 7.3% after the Swiss private
equity firm said its CEO was stepping down and warned its
performance income would be lower than expected.
Source: Khaleej Times