Europe close: Shares retreat as government bond yields extend gains
European shares finished lower on Friday as rising bond yields and fears of higher interest rates sent investors running for cover.
The pan-European Stoxx 600 index fell 1.17% to 404.99, alongside a 1.39% decline on the Cac-40 to 5,703.22 while the FTSE Mibtel to 22,848.58.
Rising rates were again in focus after the US 10-year Treasury yield rose above 1.5% during the preceding session against a backdrop of widespread wariness that higher rates could spur investors to rotate out of stocks and into bonds.
"You could argue there is a communication problem, or you could simply call it tantrum. Actually, it’s a global phenomenon as investors across the world sell rates in the expectation of a strong economic rebound and higher inflation," said Markets.com analyst Neil Wilson.
"Markets are now starting to price for rate hikes far sooner than the Fed is indicating it will act. It’s not that rates are particularly high, it’s more the pace of the move taking frothy equity markets off guard. "
"Valuations are stretched, so richly valued stocks are easily moved by these kinds of gyrations in the bond market. Whilst investors had been reasonably comfortable with a rising tide for rates, this sudden lurch higher requires repricing."
Commodity prices were also off highs, hitting miners such as BHP and Anglo American.
Shares in Belgian telecoms group Proximus fell 11% as the company on Friday said it expected lower core profit for 2021 on the back of anticipated additional spending on fibre migrations and IT transformation, and less savings from Covid-19 measures.
French information tech group Sopra Steria fell after the company said the Covid‑19 pandemic and October 2020 cyberattack had a negative impact on business activity estimated at around 10 points of growth.
Net annual profit fell to €106.8m from €160.3m in 2019.
Shares in embattled German leasing firm Grenke led the gainers, up 15.16% after the company said it would have to restate its 2019 results in response to a special audit ordered by regulators.
The probe by Audit firm Mazars, commissioned by German financial regulator BaFin last year, revealed flawed accounting, poor compliance, undisclosed related-party transactions and questionable lending by Grenke’s in-house bank.