European stocks opened lower on Wednesday as rising oil prices and elevated bond yields checked risk appetite, breaking a three-day winning streak for the pan-European STOXX 600. The pullback came even after Wall Street closed at fresh record highs, with traders now watching a $39 billion US Treasury auction and the Fed's September meeting minutes.
Germany's DAX fell 0.8% at the open, leading declines among major European benchmarks. The UK's FTSE slipped 0.4%. France's CAC 40 dropped 0.6%, Spain's IBEX eased 0.4% and Italy's FTSE MIB lost 0.5%. The pan-European STOXX 600 index fell 0.4% to 633.98 points by 0823 GMT, with tech and mining stocks leading the decline.
Oil and yields drive the retreat
Oil prices are central to the cautious mood. Brent crude is trading back above $100 as markets weigh fresh Houthi attacks on Saudi Arabia alongside a storm approaching the Gulf of Mexico. Separately, oil prices climbed almost a percent as the market priced in supply constraints from the storm and the Houthi strikes against increased Middle East crude supply.
That is keeping the inflation angle in view as 10-year Treasury yields push back above 5.30%, threatening another run at multi-decade highs. US and European bond yields edged higher broadly, adding pressure on equity valuations.
France offers only brief relief
French government bond yields eased after Marine Le Pen pledged spending cuts, but the respite proved brief: 10-year French yields have rebounded to 4.83% today from a low of 4.70% yesterday. French spreads widened on lingering concerns about the country's deteriorating fiscal situation ahead of next year's presidential election.
Individual movers and what's next
Among individual stocks, UK water utility Pennon Group shed 15.4% after launching a fully underwritten £550 million ($728.5 million) rights issue and lowering its dividend. US futures stayed little changed, with S&P 500 futures flat and Nasdaq futures down 0.1%. Attention now turns to a $39 billion US 10-year Treasury auction and the Federal Reserve's September meeting minutes, both due later today.
Sources: Investinglive, Reuters
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