European equities were broadly unchanged on Tuesday as investors assessed higher global bond yields, developments in the Middle East and economic data scheduled for release later in the day.
The pan-European STOXX 600 traded flat, while Germany’s DAX declined 0.6% and France’s CAC 40 gained 0.1%. London’s FTSE 100 fell 0.4%.
Energy producers benefited from higher commodity prices, while other sectors traded lower amid rising sovereign borrowing costs and concerns about the potential inflationary effects of higher energy prices.
Japanese government bond yields reach generational high
Fixed-income markets remained a focus after the yield on Japan’s benchmark 10-year government bond rose to its highest level in a generation.
U.S. Treasury and European sovereign bond yields also increased as investors adjusted interest-rate expectations amid inflation concerns and government debt issuance.
Higher yields affected rate-sensitive sectors including technology, real estate and high-dividend utilities, as investors assessed the impact of higher discount rates on equity valuations.
Markets assess further U.S.-Iran military exchanges
Geopolitical developments also remained in focus following further military exchanges involving the United States and Iran.
Iran launched overnight missile strikes targeting two U.S. military bases in Jordan following U.S. strikes against Iranian targets earlier in the week.
U.S. President Donald Trump subsequently raised the possibility of additional military action against Iranian infrastructure.
Energy commodity prices increased as markets assessed the potential impact of continued military activity on supplies and commercial shipping through the Strait of Hormuz.
Eurozone inflation and U.S. JOLTS data awaited
Investors were also awaiting August eurozone Consumer Price Index data, with the figures expected to provide further information on underlying inflation ahead of the European Central Bank’s policy meeting next week.
Market participants were assessing the possibility of another 25-basis-point interest rate increase from the ECB, although the decision remains subject to incoming economic data and the central bank’s assessment.
In the United States, the July Job Openings and Labor Turnover Survey is also due, providing additional information on labour market conditions ahead of Friday’s nonfarm payrolls report and the Federal Reserve’s September policy decision.
Across regional markets, industrial, automobile and consumer stocks were among the areas facing pressure. The FTSE 100 recorded a smaller decline than Germany’s DAX, with energy and mining companies accounting for a substantial proportion of the UK benchmark.
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