European shares dip as rising bond yields pressure markets

European equity markets ended lower on Wednesday as bond yields rose across both the U.S. and Europe. The trigger came from the United States, where the flash composite PMI increased to 58.4 from 56.0. Faster growth allows the Federal Reserve to maintain restrictive policy, and ongoing price pressures give grounds for doing so. Richmond Fed President Tom Barkin noted on Tuesday that inflation may turn out to be persistent, while Fed Governor Michael Barr said on Wednesday that additional policy changes will probably be necessary. (www.richmondfed.org)

The flash PMI readings for Europe also indicated ongoing expansion: all eight manufacturing and services figures for France, Germany, the eurozone and the UK sat above 50. The eurozone services index climbed to 53.0 from 51.6, surpassing the 51.4 consensus, while manufacturing held steady at 52.7. Germany saw services improve markedly to 52.9 from 49.7, and France to 51.4 from 48.0. Manufacturing eased in both countries but remained above 50. In the UK, manufacturing rose to 52.0, while services moderated to 51.7.

The expansion data were positive, but the climb in bond yields weighed more heavily on equities. The closing levels for European markets were:

• Germany’s DAX: 25,410.64, down 0.66%

• France’s CAC 40: 8,123.42, down 0.39%

• UK’s FTSE 100: 10,705.25, down 0.03%

• Spain’s IBEX 35: 19,632.20, down 0.62%

• Italy’s FTSE MIB: 51,897.50, down 0.21%

Germany’s 10-year yield added 11.6 basis points to 3.560%, France’s gained 16.8 basis points to 4.660%, and Italy’s rose 16.0 basis points to 4.506%. The U.S. 10-year Treasury yield climbed 11.6 basis points to 5.083% in the snapshot provided.

The U.S. dollar gained against all seven major currencies. The euro slipped 0.48% to 1.1392, sterling dropped 0.68% to 1.3248, and USDJPY advanced 0.57% to 158.27. The Australian dollar was the worst performer among the group, off 1.07%, followed by the New Zealand dollar, down 0.94%. Higher U.S. yields lent support to the dollar as traders weighed the prospect of further Fed rate increases.

Gold and silver headed in the opposite direction. Gold declined $76.70, or 1.76%, to $4,282.80, while silver lost $2.49, or 3.72%, to $64.53. Rising yields boost the attractiveness of interest-bearing assets compared with precious metals, and a firmer dollar adds another headwind.

Oil was the outlier among commodities in the snapshot. WTI climbed $2.91, roughly 3.24%, to $92.75 after hitting a low near a technical swing level at $88.72. For traders, that level now provides a nearby reference: staying above it keeps the rebound intact, while slipping below it would weaken the case for buyers.

U.S. equities were also lower at the time of the snapshot, with the Dow down 0.60%, the S&P 500 down 0.64% and the Nasdaq Composite down 1.02%. The market’s takeaway was straightforward: growth remains solid, but traders are balancing that strength against inflation, a stronger dollar and higher borrowing costs.