European stocks end the day on a mixed note

Trading was relatively subdued as European stock markets finished the session with a mixed performance, with Wall Street shut for Labor Day.

Energy stocks drew support from firmer crude prices, yet that came with a flip side. Higher costs for energy have the potential to keep inflation hot and add to the case for central bank rate increases. That worry nudged European bond yields up and tempered the mood across equities.

Here is how the main benchmarks settled:

• Germany's DAX ended 0.15% lower at 26,006.53.

• France's CAC 40 gained 0.33% to close at 8,306.15.

• The U.K.'s FTSE 100 finished 0.08% down at 10,822.13.

• Spain's Ibex retreated 0.14% to 20,021.80.

• Italy's FTSE MIB added 0.25%, closing at 52,230.

The Stoxx 600, the pan-European gauge, ended essentially flat at 649.90.

Energy names were among the day's stronger sectors, with Brent crude approaching the $100-a-barrel level. A robust advance in Asian semiconductor stocks also gave European technology names a lift. In the weaker corner, healthcare came under pressure as Novartis slid 3.2% following disappointing drug-trial results.

Germany's DAX underperformed modestly amid lingering political uncertainty after the AfD won in Saxony-Anhalt. France's CAC 40 advanced after a stretch of pressure tied to worries about the nation's fiscal outlook.

Benchmark 10-year yields across Europe also headed higher:

• The German 10-year yield rose 4.9 basis points to 3.39%.

• France's 10-year yield added 4.0 basis points to 4.25%.

• The U.K.'s 10-year yield gained 4.0 basis points to 5.18%.

• Spain's 10-year yield climbed 5.5 basis points to 3.83%.

• Italy's 10-year yield advanced 7.0 basis points to 4.22%.

Because bond prices and yields travel in opposite directions, the climb in yields signals selling across Europe's debt market.

At the centre of it all is a renewed worry that costlier energy will keep inflation high and oblige central banks to keep policy tight. The European Central Bank is widely expected to raise rates by 25 basis points on Thursday, and Deutsche Bank forecasts another 25-basis-point increase in December.

For equity investors, the rise in oil sets up competing forces. More expensive crude helps energy firms, but it pushes costs up across the economy and can keep interest rates elevated. Those higher yields, in turn, tend to pressure stock valuations, especially for growth companies with earnings expected well into the future.