European equities moved lower on Thursday as investors monitored diplomatic discussions between the United States and Iran, developments in the technology sector and higher government bond yields.
The STOXX 600 declined 0.4%, while Germany’s DAX fell 0.6% and France’s CAC 40 lost 0.4%. London’s FTSE 100 was down 0.3%.
Markets were also awaiting talks between U.S. President Donald Trump and Chinese President Xi Jinping later in the day, with trade relations and technology export policies among the issues in focus.
U.S.-Iran Negotiations Remain in Focus
Expectations for an immediate agreement between the United States and Iran moderated as officials from the two countries remained divided over the terms of a potential agreement and the reopening of the Strait of Hormuz.
Discussions were taking place around the United Nations General Assembly, with investors continuing to monitor the implications for energy markets.
Technology stocks were also in focus following comments from industry executives about risks associated with near-term artificial intelligence deployment, the timing of monetisation and potential regulatory requirements.
“Expectations for the Trump-Xi summit are modest, but that doesn’t mean it lacks significance. From rare earth minerals and tariffs to AI and the conflict in the Middle East, this meeting carries real implications for the global economy,” said Lukman Otunuga, head of market research at FXTM.
French Government Debt Remains in Focus
French assets remained under scrutiny ahead of business climate and consumer confidence data due later in the session.
The cost of insuring French sovereign debt against default through credit default swaps has reached multi-year highs, according to the supplied data.
French government bonds have also underperformed parts of the euro area bond market as investors assess the country’s fiscal position and parliamentary negotiations over budget policy.
U.S. Treasury Yields Rise
U.S. Treasury yields increased overnight as markets reassessed the outlook for Federal Reserve monetary policy.
According to the CME FedWatch tool data provided, markets were pricing an approximately 70% probability of another Federal Reserve interest rate increase next month, compared with around 50% previously.
This represents market-implied pricing and does not establish that the Federal Reserve will raise rates at its next meeting.
Higher government bond yields were among the factors being assessed by equity investors alongside energy prices, central bank policy expectations and geopolitical developments.
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