European equities fell for the second straight day, touching a three-week low, as accelerating inflation in Germany lifted bond yields and prompted traders to pare bets on central bank easing.
The Stoxx Europe 600 dropped 1.1% at the close in London, its biggest one-day slide in over a month, with miners as well as travel and leisure underperforming. Among individual companies, Royal Mail-owner International Distribution Services Plc gained after agreeing to a £3.6 billion takeover by Czech billionaire Daniel Kretinsky. Anglo American Plc fell after rejecting BHP Group’s request for more time to commit to a takeover offer.
European stocks are still poised to end the month with gains, lifted by a better-than-expected earnings season and expectations the European Central Bank will start cutting interest rates as soon as next month. However, the marker has lost ground since mid-month as a series of stronger data prints, especially in the US, dashed rate-cut hopes.
On Wednesday, bond yields in Europe and the US rose, with German 10-year yields hitting six month highs, after data showed consumer prices rose 2.8% from a year ago in May, up from 2.4% in April and above the 2.7% median estimate in a Bloomberg poll of economists. Treasury yields also rose to trade near a three-week high.
Bond markets are reacting as stronger economic data “is bringing back the higher-for-longer narrative. This is generally bad news for stocks, especially European ones,” said Marija Veitmane, senior multi-asset strategist at State Street Global Markets.
“European indexes have larger concentrations of economically sensitive stocks that struggle in slower economic growth environment,” she added.
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With assistance from Jan-Patrick Barnert and Sagarika Jaisinghani.
This article was generated from an automated news agency feed without modifications to text.
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Published: 29 May 2024, 11:32 PM IST