European Stocks Extend Downturn

European stocks closed sharply lower for a second session on Thursday as sovereign yields reignited their surge. The Euro STOXX 50 fell 0.8% to 6,132 and the STOXX Europe 600 dropped 0.7% to 625.7. Benchmark bond yields across the eurozone's largest economies extended yesterday's surge, especially among more indebted member states, reinforcing concerns over fragmentation across eurozone sovereign bond markets. Contagion fears continued to weigh on banking stocks, with UniCredit, Intesa Sanpaolo, ING, and Santander dropping between 2.5% and 3.1%. In addition, accounts of the latest ECB meeting confirmed that the Governing Council continues to see upside inflation risks in the bloc's economy. Meanwhile, Argenx tumbled over 15% after discontinuing its late-stage study of Vyvgart, a drug for adults with Sjögren's disease.

European stocks traded lower on Thursday, with the STOXX 50 falling 1.2% and the STOXX 600 declining 0.9%, extending losses from the previous session and falling to their lowest levels since mid-June, as a surge in oil prices weighed on risk sentiment amid escalating tensions in the Middle East. Oil prices climbed following reports that the White House had asked the Pentagon to draw up strike options against Iran that could be executed before the midterm elections.The rise in oil prices pushed bond yields higher again, adding further pressure on equities. Basic resources led the declines, while banks and healthcare stocks also came under pressure. In contrast, oil and gas shares traded higher. Among the largest companies, ASML (-1.6%), HSBC (-2%), Novartis (-1.1%), LVMH (-1%), Siemens (-1.9%) and L'Oreal (-1%) were all lower while Shell (1.1%) and TotalEnergies (1.1%) booked gains.

European equity markets were expected to open lower on Thursday, extending the previous session’s declines as oil prices climbed amid fears of a potential escalation between the US and Iran and continued threats to oil flows from the Middle East, stoking inflation concerns. The latest FOMC minutes also pointed to a hawkish stance among policymakers amid elevated inflation risks. In Europe, investors will focus on German trade and new car registration data, along with the latest ECB Monetary Policy Meeting Accounts. On the corporate side, UK retailer Tesco is scheduled to report earnings. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were down 0.2% and 0.3%, respectively.