European Shares Dip Amid Bond Yield Surge and Interest Rate Concerns

European shares dipped on Wednesday due to rising bond yields, stoking fears of elevated interest rates. The STOXX 600 index fell, with France's CAC 40 underperforming. Oil and gas shares bucked the trend, while upcoming economic data and inflation updates remain focal points for investors.

Reuters | Updated: 29-05-2024 14:13 IST | Created: 29-05-2024 14:13 IST
European Shares Dip Amid Bond Yield Surge and Interest Rate Concerns
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European shares declined on Wednesday as rising bond yields globally spurred concerns of interest rates staying elevated for longer, even as investors awaited more economic data to firm up bets on rate cuts.

The pan-European STOXX 600 index fell 0.3% to a three-week low, a day after logging its worst day in a month. All markets and sectors in the region were trading in the red, with France's CAC 40 index the worst performing market among peers.

Oil and gas was the only gainer among sectors, rising 1% as oil prices climbed on expectations that major producers will maintain output cuts at a meeting this Sunday. The yield on U.S. 10-year Treasuries rose to a near four-week peak at 4.5678%, while Germany's 10-year bond yield spiked to a one-month high and was last at 2.606% as traders digested the unexpected improvement in U.S. consumer confidence on Tuesday.

Money markets are currently pricing in interest rate cuts of 57 basis points (bps) in 2024 by the European Central Bank, with the first full 25 bps cut expected in July. Investors will now shift their focus to the preliminary inflation data from Germany at 1200 GMT, which is expected to show some moderation on a monthly basis in May.

"Inflation expectations in the Eurozone fell to the lowest levels since 2021. All eyes are on a series of Eurozone inflation updates that are due to hit the ground starting from today," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. U.S. Personal Consumption Expenditure (PCE) price index, due on Friday, would be another key economic data on investors' radar.

Anglo American slid 0.9% after BHP Group sought more timeto engage with it over its 38.6 billion pounds ($49.20 billion) offer. Shares of Royal Mail's parent company International Distributions Services jumped 3.4% as it agreed to a 3.57 billion pound formal takeover offer by Czech billionaire Daniel Kretinsky.

Delivery Hero slid 3.3% after Morgan Stanley cut its rating to equal-weight from overweight. Online supermarket Ocado fell 5.2% to the bottom of STOXX index after the stock moved from London's FTSE 100 to the midcap FTSE 250 index.

Meanwhile, German consumer sentiment improved for the fourth month in a row heading into June as the outlook brightened and income expectations rose, a survey showed.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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