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Europe Markets

March 18, 2021, 9:04 a.m. EDT

Yield on U.S. 10-year surges, pressuring Nasdaq-100 as European stocks edge up

By Steve Goldstein

European stocks rose on Thursday in the first opportunity to react to the latest Federal Reserve decision, with the big story being the selloff in bonds the central bank did nothing to quell.

The Stoxx Europe 600 (STOXX:XX:SXXP) rose 0.3%, with even stronger gains for the Stoxx Europe TMI Value index (STOXX:XX:STVP) .

The yield on the 10-year U.S. Treasury (XTUP:BX:TMUBMUSD10Y) jumped as high as 1.73%, with the move coming as European traders started their shift. Yields on German (XTUP:BX:TMBMKDE-10Y) and U.K. (XTUP:BX:TMBMKGB-10Y) bonds of similar maturity also rose, though not by the same magnitude. Yields move in the opposite direction to prices.

Banks including Deutsche Bank (ETR:XE:DBK) rose on the growing gap between short- and long-dated yields, while the rising bond yields sent Nasdaq-100 futures (CME:NQ00) lower.

The Federal Reserve’s dot plot signaled that the median voter didn’t anticipate lifting interest rates in two years. Chair Jerome Powell said the central bank would keep policy loose until employment recovers, as he played down what is expected to be a big upturn in inflation readings in the new few months.

The Bank of England separately is making its own interest-rate decision at noon local time, or 8 a.m. Eastern. Like the Fed, the focus will be on the messaging, particularly with the U.K. COVID-19 vaccination efforts being fruitful. “Whilst there is little doubting the consensus for ‘no change’, the market will be looking for any hint of a shift in the MPC’s [Monetary Policy Committee’s] bias, either through voting or outlook,” said Michael Matthews, fund manager at Invesco.

Also on the move in Europe, automobile maker Volkswagen’s (ETR:XE:VOW3) preference shares extended their run to a fresh six-year high, rising 2%. Porsche Automobil Holding (ETR:XE:PAH3) , which is the majority owner of Volkswagen, gained 5%. Hopes around Volkswagen’s electric-vehicle ambitions have been fueled by the company’s battery presentation earlier in the week.

Sartorius (ETR:XE:SRT) , the provider of pharmaceutical and laboratory equipment, jumped 10% after hiking sales and margin guidance for the year, citing a strong first 10 weeks of 2021.

Fevertree Drinks (LON:UK:FEVR) shares slumped as much as 11%, after the tonic-water maker guided for worse margins than the market expected.

Zur Rose (SWX:CH:ROSE) , the Swiss pharmacy chain benefiting from the German switch to online deliveries, dropped 8% as it said it can exceed 4 billion francs in sales “toward the beginning” of a three-to-five year window, and break even in 12 to 18 months after 2021.

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