European stocks erased an earlier gain and ended lower on Tuesday after U.S. 10-year Treasury yields jumped to the psychologically important 3% level, which is seen as a headwind for equities.
How markets are moving
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +0.24% fell 0.02% to close at 383.11. The pan-European benchmark traded around its highest level earlier in the day, but lost momentum in the final hours of the trading day.
On Monday, the benchmark rose 0.4% and finished at its highest level since Feb. 2.
Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +1.33% fell 0.2% to 12,550.82, while France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +1.79% ended 0.1% higher at 5,444.16.
The U.K.’s FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +1.26% bulked up by 0.4% to 7,425.40, scoring a sixth straight win. The London benchmark was boosted by the energy sector as oil prices rose.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.0818% bought $1.2227, up from $1.2209 late Monday in New York.
The yield on Germany’s 10-year bund /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y +3.15% rose 0.3 basis points to 0.631%, according to Tradeweb data, as prices fell.
What’s driving the market
European stocks lost grip of their gains after the U.S. 10-year interest rate /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.56% — considered the world’s most important bond-market indicator — climbed to 3% for the first time since 2014. Higher yields typically weigh on stocks as bonds start to offer better returns than equities and push up borrowing costs for companies.
Many European companies operate and borrow money in the U.S. and therefore are also impacted by the U.S. yields.
Oil shares stood out as best performers, sending the Stoxx Europe 600 Oil & Gas Index /zigman2/quotes/210599627/delayed XX:SXEP +1.20% climbing by 1.2%. The moves came as Brent crude prices traded above $75 a barrel, the highest since 2014, as tensions between Saudi Arabia and Yemen heated up.
Also, speculation that U.S. sanctions on Iran will be put back in place in May helped push up Brent and oil prices .