European stocks fell sharply on Tuesday, erasing much of the previous session’s gains and extending their recent positive correlation with government bonds, as rising energy prices renewed fears of higher inflation. The Eurozone’s STOXX 50 declined 1% to close at 5,778, while the pan-European STOXX 600 lost 0.8% to finish at 601. Fresh clashes between opposing forces in the war in Iran heightened expectations of a prolonged disruption to energy exports from the Persian Gulf, driving another spike in oil and gas prices for European economies.
Banks retreated markedly, giving back part of Monday’s advance amid concerns over higher credit costs, with Santander, UniCredit, and Deutsche Bank each sliding more than 1.5%. In the technology sector, SAP and Prosus dropped 2.5% and 1.6%, respectively, leading the declines. Defense group Rheinmetall tumbled 8% after signaling weaker-than-expected order volumes.
