European stocks closed lower on Wednesday, pressured by a sharp rise in sovereign bond yields. The Euro STOXX 50 lost 0.4% to finish at 6,300, while the STOXX Europe 600 slipped 0.3% to 640.7.
Sovereign yields across the Eurozone surged to multi-decade highs, as robust economic growth combined with higher energy prices reinforced expectations that the ECB will continue raising interest rates this year. The Eurozone’s PMI came in stronger than anticipated for both services and manufacturing, and the survey indicated that the spike in energy costs during the period was being passed through to output prices.
In the financial sector, Allianz and Deutsche Bank dropped 3.8% and 2.6%, respectively, while Bund prices slumped. BNP Paribas also declined by more than 1%, setting a negative tone for other credit-sensitive financial stocks. German automakers were under pressure as well, with Mercedes-Benz and BMW each falling around 3%.
