Europe close: Stoxx 600 drops 1 per cent as bond yields climb
Stock markets across Europe registered steep losses on Wednesday as a renewed rise in bond yields and oil prices drove profit-taking after three days of equity gains.
The Stoxx Europe 600 index finished 1.1% lower at 629.95, having gained 1.6% over the past three days since slumping to four-month low last Thursday. Banking stocks were among the day's worst performers.
Markets Stateside also opened on the back foot, with the S&P 500 and Nasdaq both retreating from record highs set the previous session.
Chris Beauchamp, chief market analyst at IG, said there was a "firm risk-off atmosphere" worldwide. “The catalogue of worries about oil prices and government borrowing costs continues to hobble the equity market," he said.
Bonds were mostly sold off across Europe, with French bonds rising as fiscal concerns remained in focus. 10-year OAT yields surged 13.7 basis points to 4.892%, heading back towards the 5.0% mark briefly reached on Monday – a level not seen since July 2002.
US Treasuries also weakened with the 10-year and 30-year yields also both hitting 24-year highs at 5.361% and 5.730%, respectively.
Meanwhile, oil prices were on the rise again, with front-month Brent crude up 0.3% at $100.86 a barrel,
“Iran appears to be ramping up the tensions in the Middle East again, warning that the southerly routes out of Hormuz that have been so vital to restoring oil flows are to be closed. Oil traders appear to doubt its ability to achieve this given the preponderance of US forces, but the mere threat will drive up freight and insurance costs still further," Beauchamp said.
In equity news, shares in British water utility Pennon Group slumped as the company launched a fully underwritten £550m rights issue and cut its dividend as part of a major operational reset and increased investment programme.
Also in London, HSBC was in the red amid reports the bank is planning sweeping job cuts in its UK wealth management business, drastically reducing its ranks of financial advisers and other specialists as part of a push to use AI to help serve wealthy clients.
Continental peers Société Générale, BNP Paribas, UBS, Deutsche Bank and Intesa Sanpaolo were also lower as the broader financial sector weakened.
In Frankfurt, Porsche edged higher after an investor event unveiled targets to lift profitability and cut its reliance on sales volumes, as the sports-car maker unveiled a new strategy running through to 2035. Porsche will focus more heavily on higher-margin models, greater personalisation and lower costs, while seeking to bring its break-even point below 200,000 vehicles a year.
However, the rest of the auto sector was firmer on reports that the EU was looking at a possible import restriction on Chinese hybrid cars. Renault, Volkswagen and Stellantis were all higher.