Europe: Rising bond yields, Middle East conflict weigh on stocks

EUROPEAN shares edged lower on Monday as rising government bond yields and concerns over the Israel-Hamas war kept investors on edge, while Italy’s FTSE MIB index was among top gainers across the regional markets.

The pan-European Stoxx 600 ended 0.1 per cent lower after declines of over 3 per cent in the previous week.

While European Union leaders are set to call for a “humanitarian pause” in the Israel-Hamas war so aid could reach them, Israel continued its bombardment of the besieged enclave.

Washington warned of a significant risk to US interests in the Middle East as Israel bombarded Gaza with air strikes.

Adding to the pressure, the yield on the benchmark 10-year US Treasury note rose above 5.0 per cent on Monday before paring gains, ahead of key gross domestic product and inflation data from the country later this week.

“The GDP (data) is likely to show quite a robust third quarter and add to expectations that the Fed will keep rates in restrictive territory for longer,” said Laura Cooper, senior macro strategist for iShares EMEA at BlackRock.

Investors will brace for earnings from major US technology firms such as Microsoft and Alphabet and the European Central Bank’s interest rate decision, due later this week.

“European government bond yields are at multi-year highs in line with what we are seeing in the US despite very different growth and inflation dynamics. So we expect the ECB to take on more of a dovish tone,” said Cooper.

Miners shed 1.1 per cent as prices of most base metals took a hit from geopolitical tensions, while rate-sensitive real estate stocks hit their lowest level since 2012, before paring declines. The sector ended 0.6 per cent down.

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Italy’s FTSE MIB index was among few gainers across the region, up 0.7 per cent, boosted by a 2.6 per cent rise in UniCredit as the lender planned to buy a 9 per cent stake in Alpha Bank .

Among other movers, Volkswagen slipped 0.9 per cent, falling as much as 3.2 per cent to its lowest since April 2020 after the carmaker cut its profit margin outlook for the current year on Friday.

Philips fell 2.0 per cent after the Dutch health group reported a drop in third-quarter orders.

Limiting losses in the healthcare sector, Indivior jumped 5.2 per cent after the drugmaker said it will pay US$385 million to settle a lawsuit related to its opioid addiction treatment.

Getinge rose 3.8 per cent after the Swedish medical gear maker beat quarterly sales expectations.

Britain’s Vistry dropped 5.8 per cent to the bottom of the Stoxx 600 after the homebuilder lowered its annual profit forecast and said it would cut 200 jobs. REUTERS