European stocks fell Tuesday, tracking losses across global markets, as investors grew increasingly concerned about a sharp rise in U.S. bond yields and its impact on the cost of borrowing.
Heavily-weighted oil companies led the decliners, as crude-oil prices came under pressure.
What are markets doing?
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP -0.59% fell 0.9% to close at 396.12, posting its biggest one-day percentage loss since Nov. 9, according to FactSet data.
Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX -0.80% dropped 1% to 13,197.71, while France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 -0.72% dropped 0.9% to 5,473.78. The U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -0.04% fell 1.1% to 7,587.98.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.1499% traded at $1.2393 compared with $1.2383 late Monday in New York, while the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD 0.0000% rose to $1.4114 from $1.4075.
The pound rebounded after falling below $1.40 earlier in the session on concerns about the Brexit negotiations. A leaked U.K. government analysis paper revealed that the country’s economy would suffer widespread damage no matter what trade deal the U.K. agreed on its exit from the European Union.
What is driving the market?
European stocks fell as part of a wider global selloff, in which the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.10% fell more than 300 points, as investors continued to fret about a rally in bond yields. Higher returns on debt securities typically make stocks and other assets perceived as risky less attractive to investors.
After hitting its highest level since April 2014 on Monday, the yield on the benchmark 10-year Treasury /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -1.01% continued higher on Tuesday, trading above 2.71% on Tuesday.
Energy company shares were taking a hit, as U.S. crude futures dropped 2%. Shares of Statoil ASA fell 2.2%, Total SA fell 1.7%, and BP PLC /zigman2/quotes/207305210/composite BP -0.15% lost 1.5%.
Mining stocks were under pressure amid reports one of China’s biggest coal regions had asked coal miners to cancel their holidays on fears over a potential power outage during the Spring Festival holidays. Anglo American PLC /zigman2/quotes/201381512/delayed UK:AAL -0.13% ended down 2.3%.
What are strategists saying?
“The global stock selloff has persisted into a second day, with overnight losses in Asia giving way to widespread selling in Europe and the U.S. Interestingly, with gold and the yen gaining ground over recent weeks, there has clearly been an underlying risk-off move waiting to rear its head. However, with Treasurys selling off throughout the beginning of 2018, there is reason to believe that market confidence will not be gone for long, as investors shift away from bonds amid improved economic and corporate performance,” said Joshua Mahony, market analyst at IG.