Energy names hit by weak crude prices
European stocks fell Tuesday, tracking losses across global markets, as investors grew increasingly concerned about a sharp rise in U.S. bond yields and its impact on the cost of borrowing.
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Heavily-weighted oil companies led the decliners, as crude-oil prices came under pressure. Banks were also taking a hit across the board, after a strong start to 2018. A stronger euro also appeared to weigh on shares.
What are markets doing?
The Stoxx Europe 600 index fell 0.5% to 397.57, on the heels of a 0.2% loss on Monday.
Extending earlier losses, Germany's DAX 30 index dropped 0.6% to 13,243.67, while France's CAC 40 index dropped 0.5% to 5,496.95. The U.K.'s FTSE 100 index (http://www.marketwatch.com/story/uk-stocks-rise-for-2nd-day-boosted-by-copper-rally-and-pound-pullback-2018-01-29)fell 0.7% to 7,819.43 (http://www.marketwatch.com/story/ftse-100-slides-as-us-bond-selloff-spooks-investors-2018-01-30). Spain's IBEX 35 index slid 1% to 10,445.50.
Those losses came as the dollar turned lower, driving the euro to $1.2426 from $1.2383 late Monday in New York, while the pound rose to $1.4126 from $1.4075.
The pound rebounded after falling below $1.40 earlier in the session on concerns about the Brexit negotiations. A leaked U.K. government analysis paper (http://www.marketwatch.com/story/uk-governments-own-analysis-shows-widespread-damage-from-brexit-2018-01-30) revealed that the country's economy would suffer widespread damage no matter what trade deal the U.K. agreed on its exit from the European Union.
What is driving the market?
U.S. stock futures indicated Wall Street was headed for a second-straight session of losses (http://www.marketwatch.com/story/dow-futures-slide-150-points-signaling-another-painful-session-2018-01-30), as investors continued to fret about a rally in bond yields. Higher returns on debt securities typically make stocks and other assets perceived as risky less attractive to investors.
Asian stock markets also lost ground (http://www.marketwatch.com/story/asia-pacific-markets-slide-after-wall-street-stumbles-2018-01-29), leaving little foothold for European equities to try to climb higher.
After hitting its highest level since April 2014, the yield on the benchmark 10-year Treasury was trading above 2.7% on Tuesday.
Energy company shares were taking a hit, as U.S. crude futures dropped 1%. Shares of Statoil ASA (STL.OS) fell 1.7%, Total SA (TOT) (TOT) fell 1%, and BP PLC (BP.LN) (BP.LN) lost 0.8%.
Mining stocks were under pressure amid reports one of China's biggest coal regions had asked coal miners to cancel their holidays on fears over a potential power outage during the Spring Festival holidays. Anglo American PLC (AAL.LN) was down 2.4%.
What are strategists saying?
"The ability of the equity market to absorb higher bond yields is critical," said Goldman Sachs equity analysts in a research note Monday, cited in a Wall Street Journal report. "So far, it has been able to do so as growth expectations have continued to rise. But there are risks that the bond markets adjust too rapidly from current levels."
"Certainly the dynamics have shifted in bond markets. Central banks are either out of the market or buying fewer bonds. The Fed is now in the business of selling not buying. The ECB seems to be teeing up a short taper that could see QE end in September, which is a shade earlier than most anticipated back in December," said Neil Wilson, senior market analyst at ETX Capital, in a note to clients.
Which stocks are in focus?
Loomis AB(LOOM-B.SK) was the top decliner in Europe, dropping 8.8% after the Swedish cash handling company posted results.
Shares of Siemens Gamesa Renewable Energy SA(SGRE.MC) surged 5.8% after results. The wind-turbine maker's sales were in line with expectations (http://www.marketwatch.com/story/siemens-gamesa-posts-loss-on-us-tax-hit-2018-01-30), but it posted a first-quarter net loss due to revamp and integration costs and U.S. tax reform.
Shares of Ryanair Holdings PLC (RYAAY) fell 1% after the discount airline and the British Airline Pilots' Association said they have struck an agreement (http://www.marketwatch.com/story/ryanair-makes-breakthrough-in-pilot-union-talks-2018-01-30) for the representation of cockpit crew. The deal is seen as a major breakthrough in Ryanair's talks with labor groups.
UBM PLC (UBM.LN) rose 4.4% on news of a 3.9 billion-pound ($5.47 billion) takeover offer (http://www.marketwatch.com/story/ubm-agrees-to-39-bln-takeover-offer-from-informa-2018-01-30)from Informa PLC (INF.LN) . Informa shares rose 1.7%.
What's on the economic docket?
An official preliminary estimate showed eurozone gross domestic product rose 0.6% in the fourth quarter, in line with forecasts.
The French economy, in particular, accelerated at its fastest pace in six years (http://www.marketwatch.com/story/french-economy-accelerates-at-fastest-in-6-years-2018-01-30), with gross domestic product climbing 1.9% in 2017 from 2016. Meanwhile, separate data showed French consumer spending dropped unexpectedly in December. (http://www.marketwatch.com/story/french-consumer-spending-falls-unexpectedly-2018-01-30)
(http://www.marketwatch.com/story/french-consumer-spending-falls-unexpectedly-2018-01-30)Spanish economic growth likely expanded by 0.7% in the fourth quarter of 2016 (http://www.marketwatch.com/story/spanish-economic-growth-slows-in-4th-quarter-2018-01-30), according to the country's national statistics agency, based on preliminary data. If confirmed, that will indicate a slight slowdown from 0.8% growth in the third quarter.
A report on German consumer price inflation in January is due for release at 1 p.m. London time, or 8 a.m. Eastern Time.
(END) Dow Jones Newswires
January 30, 2018 07:48 ET (12:48 GMT)