European Stocks Pull Back

European stocks closed lower on Wednesday amid pressure from a surge in sovereign yields. The Euro STOXX 50 fell 0.4% to 6,300 and the STOXX Europe 600 eased 0.3% to 640.7. Sovereign yields in the Eurozone soared to multi-decade highs as the combination of strong economic growth and higher energy prices consolidated the likelihood that the ECB will continue to raise interest rates this year. The Eurozone's PMI was stronger than expected for both services providers and manufacturers, while the survey confirmed that soaring energy prices in the period were passed on to output charges. Allianz and Deutsche Bank sank 3.8% and 2.6% and Bunds tumbled, while BNP Paribas fell over 1% to set the tone for credit-sensitive financial companies. German auto manufacturers also slipped, with Mercedes Benz and BMW dropping around 3% each.

European stocks reversed early gains, with the STOXX 50 and STOXX 600 both falling 0.2%, as oil prices swung as traders assess Saudi Arabia’s move to restart a key pipeline while awaiting further diplomatic efforts between the US and Iran to end the conflict in the Middle East. Meanwhile, flash PMI data showed stronger-than-expected services activity across the Euro Area, Germany and France. AstraZeneca fell 1.1% despite securing European approval for its Trixeo inhaler as a maintenance treatment for asthma. Allianz dropped 2.1%, Anheuser-Busch InBev lost 1% and Siemens Energy fell 1%, while SAP gained 1.3%.

European stocks moved higher on Wednesday, with the STOXX 50 rising 0.5% and the STOXX 600 gaining 0.4%, extending their advance for a third consecutive session. The continued decline in oil prices remained a key driver of sentiment, offering further relief on inflationary pressures. Oil prices fell for a sixth straight day amid growing signs that a potential agreement between the US and Iran could help end the war and facilitate the reopening of the Strait of Hormuz. Meanwhile, flash services PMIs for the Euro Area, Germany and France came in way better-than-expected. The banking sector was higher, including HSBC (1%), BBVA (0.6%), Unicredit (1%) and BNP Paribas (1%). The luxury sector also traded in the green, including LVMH (1.3%), Hermes (0.9%) and Richemont (0.9%). Other notable gainers include SAP (1.8%). On the other hand, the telecommunication sector was under pressure, with Telefonica (-1.2%), Orange (-1.8%) and Vodafone (-1.8%) trading lower.