European equities fell for the second straight day, touching a three-week low, as accelerating inflation in Germany lifted bond yields and reinforced belief that central banks across the developed world will not be able to ease policy as much as earlier expected.
The Stoxx Europe 600 dropped 1% as of 1:35 p.m. in London, its biggest one-day slide in 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, dented 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 concentration 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