European stock markets largely fell on Thursday, influenced by rising global bond yields and the anticipation of crucial inflation data set to be released at the end of the week.
As of 03:10 ET (07:10 GMT), Germany’s DAX index traded 0.3% lower, while the U.K.’s FTSE 100 dropped 0.2%. In contrast, France’s CAC 40 edged up 0.1%.
Impact of Rising Yields on Sentiment
The decline in European equities mirrors the weakness seen on Wall Street and in Asian markets overnight. Investor sentiment has been negatively affected by rising U.S. Treasury yields, fueled by inflation concerns. This has led to speculation that interest rates will remain high for a longer period than previously anticipated.
On Thursday, the two-year U.S. Treasury yield approached the 5% mark, while the 10-year yield stayed near its highest level in weeks. Wednesday’s data showed that consumer prices in Germany rose more than expected in May, intensifying the focus on the eurozone’s inflation data due on Friday. The eurozone inflation rate is projected to increase to 2.5% year-on-year in May, up from 2.4% in April.
Although the European Central Bank is expected to cut interest rates next week, investor uncertainty about future monetary policy decisions persists.
U.S. Economic Data in Focus
In the U.S., attention is focused on the upcoming gross domestic product (GDP) data later in the day and the Personal Consumption Expenditures (PCE) price index data, the Federal Reserve’s preferred inflation measure, scheduled for release on Friday. Several Federal Reserve officials have emphasized the need for more significant progress on inflation before considering rate cuts.
BHP Withdraws from Anglo American Deal
In corporate news, BHP Group’s stock fell 1.7% after the mining giant decided not to proceed with a formal offer for Anglo American, abandoning its $49 billion takeover bid. BHP cited unresolved issues regarding South African regulatory risks and costs, and the lack of “key information” from Anglo American as reasons for the withdrawal.
Crude Prices Dip Despite U.S. Inventory Draw
Crude oil prices slipped on Thursday, as broader concerns about high borrowing costs outweighed optimism from a larger-than-expected draw in U.S. inventories. By 03:10 ET, U.S. crude futures (WTI) were down 0.3% at $79.03 per barrel, while the Brent contract also fell 0.3% to $83.10 per barrel.
The American Petroleum Institute reported a significant draw of nearly 6.5 million barrels in U.S. oil inventories last week, far exceeding expectations of a 1.9 million barrel draw. This data typically predicts similar trends in the official inventory data due later Thursday, suggesting increased U.S. fuel demand with the onset of the travel-heavy summer season, particularly around the Memorial Day weekend.