European shares muted as oil and bond pressures offset UK homebuilder rally

European shares were little changed on Monday as a rally in British homebuilders was offset by higher oil prices and elevated bond yields, which dampened risk appetite. The pan-European STOXX 600 closed ‌flat at 638.68, with most major regional indexes subdued. Spain's financials-heavy IBEX fell 0.5%.

British housebuilder stocks surged after the government said it would confirm a new equity-loan programme for first-time buyers in next month's budget, reviving support for home ownership and residential construction. Shares of Persimmon, Barratt Redrow, Taylor Wimpey, Vistry ‌soared between 10.4% and 14.7%. Britain's blue-chip FTSE 100, however, ended down 0.1%.

"The plan will slash the deposit required to 2.5% ‌from 5%, which should help give access to lower income first-time buyers," said Kathleen Brooks, research director at XTB. "The dial has shifted for UK homebuilders and we could see the start of a new bull market for this sector."

Broader market gains were restrained by a 2% rise in Brent crude after US President Donald Trump rejected ⁠an Iranian ​proposal to reopen the Strait of ⁠Hormuz and end hostilities. European energy stocks rose 0.8%, while miners fell 1.2% as gold hit a seven-week low and copper slipped to a one-week trough.

Hochschild Mining, Fresnillo and Endeavour Mining ⁠were among the biggest fallers, dropping between 5% and 7%. Heavyweight industrials and technology stocks lost 0.4% and 0.2%, respectively.

Bond yields remained elevated. Germany's 10-year government bond ​yield, the euro zone benchmark, was last at 3.643%, its highest level since June 2009. Central banks have responded to oil-driven inflation pressures ⁠with a series of interest-rate hikes, with the European Central Bank raising rates for a second time this year.

"As hawkish Federal Reserve — and other central bank — expectations gain ⁠ground, ​this week brings a relatively busy economic calendar, with the focus on the US labour market and inflation, and another important test for the AI trade with Micron earnings," said Ipek Ozkardeskaya, senior analyst at Swissquote. With quarterly earnings season approaching next month, investors are likely to ⁠demand stronger results to offset concerns about geopolitical tensions and higher borrowing costs.

Investors will also monitor speeches by ECB President Christine Lagarde and ⁠Bank of England Deputy Governor Dave Ramsden ⁠later in the day. Among individual stocks, Danieli plunged 15.4% after the Italian iron and steel factory equipment maker missed annual earnings estimates.

Italy's Trevi rose 3% to a six-month high after construction peer ICOP raised ‌its all-share takeover bid for ‌the firm.