European shares traded little changed on Tuesday, with a fresh selloff in government bonds dampening investor sentiment. However, gains in energy stocks and positive corporate news helped to limit overall losses.
The pan-European STOXX 600 index was up 0.04% at 651.35 points by 0729 GMT. In contrast, Britain’s FTSE 100 fell 0.4% as trading resumed after a bank holiday. Germany’s DAX slipped 0.2%, while France’s CAC 40 saw a gain of 0.4%.
Bond yields across major markets climbed sharply. Investors are increasingly concerned that higher oil prices could reignite inflation, potentially forcing central banks to maintain elevated interest rates for a longer period. Germany’s 30-year government bond yield reached a fresh 15-year high, and France’s 30-year yield hit its highest level since 2008.
Renewed conflict in the Middle East has driven up energy prices, adding to inflationary pressures. Hawkish remarks from Federal Reserve Chair Kevin Warsh last week also contributed to expectations of tighter monetary policy.
Data from LSEG indicated that markets are pricing in an interest-rate hike by the European Central Bank in September. Investors are awaiting August inflation data for the euro zone later on Tuesday for further insights into the ECB’s policy direction.
Energy stocks were among the best performers, with a 1.4% rise as Brent crude traded around $92 a barrel.
In individual stock news, Reckitt Benckiser Group jumped 5.2% after a jury ruled in favor of the company in a trial concerning allegations of failure to warn about potential risks associated with products for premature babies. Air Liquide shares gained 3.8% following media reports that activist investor Elliott Investment Management had acquired a stake in the French industrial gases company.
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