European Markets Slip; Oil Surge and Rising Yields Weigh on Sentiment
European stock markets traded lower on Tuesday (August 18) as rising oil prices and a surge in bond yields reignited inflation concerns. The pan-European STOXX 600 index fell approximately 0.2% to 654.81 in early trading.
Market pressure mounted as prospects for a lasting peace between the United States and Iran dimmed. A senior Iranian official stated that Tehran would shift to a more offensive military stance following a deadlock in negotiations, while Washington refused to extend a temporary ceasefire agreement.
The energy sector was among the top performers, rising about 0.6% after Brent crude strengthened to around US$91.41 per barrel. While high oil prices benefit energy companies, they also raise concerns that energy costs could once again drive up inflation in Europe.
Conversely, the basic resources sector fell by approximately 1% amid a decline in gold prices. Rising US Treasury yields have dampened the appeal of precious metals ahead of the release of the Federal Reserve's July meeting minutes, which are expected to provide key clues regarding the future direction of interest rate policy.
Pressure was also evident in European bond markets. The yield on the 10-year German Bund hit its highest level since 2011, while the yield on the 10-year French bond touched a 16-year high. Investors worry that a prolonged Middle East conflict could fuel inflation while simultaneously driving up government defense spending.
Newsmaker Analysis: European markets are currently facing dual pressures from surging energy prices and rising bond yields. As long as Brent crude remains above US$90 and the risk of US-Iran conflict persists, interest-rate-sensitive stocks are likely to remain under pressure. While the energy sector may provide some support, the risks of inflation and higher funding costs could limit overall index gains. (asd)
Source: Newsmaker.id
