FRANKFURT: European shares closed sharply lower on Wednesday after three straight sessions of gains, as higher oil prices and a rise in bond yields sapped risk appetite.
The pan-European STOXX 600 index ended 1 percent lower, giving up most of the gains from the last three sessions. Banks took a beating once again, down 3.3 percent.
Tech stocks also eased from record highs. BE Semiconductor Industries fell 8.5 percent after UBS downgraded the Dutch chip-equipment maker’s stock to “sell”, citing risks to the adoption of chip-packaging technique hybrid bonding.
“People are betting that the mega spending in AI is not letting up, and that inflationary pressures linked to a higher oil price won’t derail the tech-related good news,” said Russ Mould, investment director at AJ Bell.
European stocks have come under pressure, as a global bond market rout shows no signs of slowing with investors grappling with elevated energy prices, persistent inflation pressures and uncertainty over the interest-rate outlook.
Bond yields in US and Europe edged higher on Wednesday and French spreads widened on concerns about France’s deteriorating finances ahead of next year’s presidential election.
Germany’s 10-year government bond yield rose to 3.5279 percent before ending little changed.
Brent crude rose 0.5 percent as traders weighed potential supply disruptions from a storm threatening US oil-producing regions and Houthi attacks on Saudi Arabia against higher Middle East crude supplies.
“This time, spreads are responding to fiscal concerns for which the main cause is, arguably, a global sell-off in bonds amid higher energy prices,” James Reilly, senior markets economist at Capital Economics, said in a note.
Reilly said that French stocks could remain laggards if tech stocks continued to drive market growth, and a recovery was unlikely until the fiscal situation improved materially.
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