Europe midday: Shares slump as rising bond yields spook investors
European shares slumped on Tuesday as worries over an economic slowdown in China and rising bond yields hit sentiment.
The pan-European Stoxx 600 index extended morning losses to stand 1.54% lower at midday with all major regional bourses lower.
"Yields are popping, as a bond market selloff that started last week in the wake of the Fed meeting gathers steam. US 20-year and 30-year paper is yielding the most since July, both above 2%, whilst the benchmark 10-year note has jumped above the psychologically important 1.5% level to 1.53%, its highest since June," said Neil Wilson at Markets.com.
"Bets on central banks tightening monetary policy more swiftly than previously thought are fuelling the selling in rates as investors also focus in on the wrangling in Washington over the US debt ceiling."
Markets were also rattled by data showing profit growth at China’s industrial firms slowed for a sixth month in August. A power crunch in some parts of the country has shut down factories and left some households without electricity under an effort to meet official energy use targets.
Investors are worried that could exacerbate the global supply chain bottleneck throughout Asia ahead of the critical Christmas shopping period.
“The final week of the quarter is currently beset by concerns of persistent inflation on both sides of the pond, as supply chain shortages spread their net further," said interactive investor head of markets Richard Hunter.
"The oil price has seen the results of a current imbalance arising from worries of tightening supply, with the price now having risen by 55% in the year to date. Meanwhile the shortage of van drivers is having an impact on the broader delivery of goods in both the US and the UK, and with wage rises likely to follow, there is an increasing unease that inflation could be more persistent than originally thought."
The rally in Brent crude futures above $80 per barrel continued to support energy stocks, with BHP, Shell, Total and ENI all higher.
Shares in UK engineering group Smiths rose 4% as the company reported a return to revenue revenue growth and an increased final dividend as markets recovered from the Covid-19 crisis.
Swiss computer peripherals maker Logitech slumped 6.56% as Morgan Stanley downgraded the stock to 'underweight'.
Dutch semiconductor supplier ASM International fell despite raising its third-quarter order intake guidance.