“European investors brace for turbulence as Treasury yields surge to 5%, signaling potential headwinds for the continent’s stocks.”
European stocks fell as the 10-year yield on Treasuries hit 5% for the first time since 2007. This caused Europe’s Stoxx 600 index to sink 0.4%, and S&P 500 equity futures also edged lower. The rise in the US 10-year note yield was driven by investor expectations of a strong economy that will keep interest rates higher for a longer period. Additionally, oil slipped to $87 a barrel.
Some notable stock movements included Volkswagen AG, which retreated almost 3% after missing earnings expectations, and Royal Philips NV, which lost 4% after reporting a drop in order intake. The UK’s Vistry Group Plc also experienced a significant tumble following the announcement of hundreds of job cuts.
Traders are closely monitoring developments in the Middle East after Hamas released two US hostages and aid started to trickle through Egypt’s border with Gaza over the weekend. However, the respite may be short-lived as Israel intensifies air raids on Gaza in preparation for the “next phase” of its conflict with Hamas. Israel has also warned that Hezbollah risks dragging Lebanon into a wider regional war.
This week, traders will be paying attention to inflation readings in Australia and Japan, as well as economic activity data in the US and Europe, in order to gauge the outlook for global interest rates. Fed Chairman Jerome Powell is also scheduled to give remarks, and the European Central Bank will deliver a policy decision later in the week.
In Argentina, investors are bracing for a potential selloff following the better-than-forecast performance of Economy Minister Sergio Massa in Sunday’s presidential vote. This outcome dashed hopes for an outright win by a more market-friendly candidate, leading to a decline in the nation’s dollar bond maturing in July 2046.
Overall, the market remains volatile, and traders are cautious amid geopolitical tensions and uncertainties surrounding global interest rates.