By Peter Nurse
Investing.com - European stock markets retreated Tuesday, with high-growth tech stocks pressured by rising bond yields, while investors digest the inconclusive German election and Chinese property group Evergrande’s ongoing debt crisis.
At 4:25 AM ET (0825 GMT), the DAX in Germany traded 1% lower, the CAC 40 in France fell 1.5% and the U.K.’s FTSE 100 dropped 0.6%.
Soaring U.S. Treasury yields following last week’s Federal Reserve meeting have translated into higher yields in Europe, with the yield on the benchmark 10-year German bund climbing 3 basis points Tuesday.
The tech sector has suffered as a consequence, with Logitech (NASDAQ:LOGI) stock falling 7.7%, not helped by Morgan Stanley (NYSE:MS) downgrading the Swiss company to ‘underweight’ from ‘equal weight’, and ASM International (OTC:ASMIY) stock falling 3.6% despite the Dutch semiconductor supplier raising its third-quarter order intake guidance.
On the flip side, financials were supported by the rising interest rates, with the likes of SEB (ST:SEBa), Aegon (NYSE:AEG), ABN (AS:ABNd), Raiffeisen (VIE:RBIV) and Virgin Money (LON:VM) all trading at 52-week highs. Eni (MI:ENI), BP (NYSE:BP) also reached 52-week highs as oil and gas prices continued to climb. Most notable was the 13-year high hit by Gazprom (MCX:GAZP), arguably the only company that can offer a reasonably quick fix to the shortage of gas in Europe.
Additionally, easyJet (LON:EZJ) stock fell 3.6% after the airline said it had received acceptances from investors for 93% of the new shares it sold as part of a 1.2 billion pound ($1.64 billion) fully underwritten rights issue.
Investors will be keeping an eye on the ramifications of Germany’s general election on Sunday, which resulted in the Social Democrats party narrowly winning the vote. Prolonged negotiations are likely to follow in order to form a coalition to govern Europe's biggest economy, but the far left's weak result has in all likelihood ruled it out as a potential partner, to the market’s relief.
Investors also continue to fret about the future of China Evergrande Group (HK:3333), and the potential for global contagion, after it failed on Friday to meet a deadline to make an interest payment to offshore bond holders. China's economy is also suffering from spreading power outages, with the electricity system unable to meet demand from both households and industry.
Back in Europe, the European Central Bank will hold its annual research meeting, with ECB President Christine Lagarde’s speech sure to be watched for any sign that rising energy prices are changing the bank's thinking about inflation. European gas and power prices surged to new record highs in early trade on Tuesday.
Ahead of that, the widely-watched German GfK consumer sentiment data showed a surprise rise in confidence in October, to +0.3 from a revised -1.1 the previous month.
Crude prices traded higher Tuesday, rising for the sixth consecutive session on concerns of a global supply crunch just as demand picks up with the easing of Covid-19 pandemic restrictions.
U.S. crude oil supply data from the American Petroleum Institute are due later in the day, as well as OPEC’s latest World Oil Outlook. By 4:25 AM ET, U.S. crude futures traded 1% higher at $76.22 a barrel, a two-month high. Brent rose 0.8% to $79.32, its highest since October 2018.
Additionally, gold futures fell 0.7% to $1,740.25/oz, while EUR/USD edged 0.1% lower to 1.1679.