Global Market: European shares hover near one-month low as bond yields, oil prices surge

European shares hovered near a one-month low on Wednesday as a sharp rise in government bond yields and escalating tensions in the Middle East heightened concerns over an inflationary shock from higher energy prices, Reuters reported.

The pan-European STOXX 600 was broadly unchanged at 647.87 points by 0714 GMT, while Germany’s DAX slipped 0.2%.

Read more: Global Market: Japanese bond yields rise as BOJ hawkish signals fuel rate-hike bets


According to Reuters, renewed hostilities between the United States and Iran this week pushed Brent crude above $95 a barrel to its highest level in six weeks. The rise in oil prices has intensified inflation concerns at a time when governments are already facing elevated borrowing costs and heavy debt burdens.

Bond markets came under further pressure, with the yield on Germany’s 10-year government bond reaching its highest level since April 2011. Markets are also pricing in a greater likelihood of tighter European monetary policy, with LSEG-compiled data showing investors assigning nearly a 40% probability that the European Central Bank’s deposit rate could reach 3% by March 2027, compared with 25% a week earlier.

Higher yields can weigh on equity valuations by increasing borrowing costs and making fixed-income assets relatively more attractive, adding to the pressure on European stocks.

Lottomatica slides after Cirsa deal
Among individual stocks, Lottomatica fell 6.3% and was temporarily halted after the Italian betting company announced plans to acquire Spain’s Cirsa.

The proposed transaction would create a combined gaming and betting business, but investors reacted negatively to the announcement. The broader European media sector was the worst-performing sector, falling 1.5%.

Nokia gains on Euro STOXX 50 return
Telecom stocks provided some support to the broader market. Nokia rose nearly 2% after index provider STOXX announced that the Finnish telecom equipment maker would return to the Euro STOXX 50 index.

The gains in telecom stocks helped offset weakness elsewhere as investors continued to assess the impact of higher oil prices, rising bond yields and the prospect of tighter monetary policy on European equities, Reuters said in the report.