Rising bond yields, Ukraine crisis weigh on European shares

Updated: Apr 19, 2022, 16:36 GMT+00:00

(Reuters) - European shares were set for their worst day in nearly two weeks on Tuesday as worries about the war in Ukraine, expectations of aggressive monetary policy tightening by the U.S. Federal Reserve and mixed earnings kept investors on edge.

German share price index DAX graph is pictured at the stock exchange in Frankfurt

By Susan Mathew and Anisha Sircar

(Reuters) – European shares posted their worst day in two weeks on Tuesday as rising bond yields, worries about the war in Ukraine and a batch of upcoming earnings kept investors on edge, while energy shares outperformed despite plunging oil prices.

The pan-European STOXX 600 lost 0.8% with defensive stocks including healthcare and consumer staples leading declines. All major regional equity markets were in the red.

But the index ended well off session lows as energy shares rose 0.5% despite a 5% slump in crude prices, and as Wall Street opened strongly on an earnings boost. [.N] [O/R]

“It’s a general concern about rising yields,” said Andrea Cicione, head of strategy at TS Lombard.

Bond yields in Europe and the United States surged on Tuesday on expectations for tighter monetary policy. [GVD/EUR][US/]

TotalEnergies, BP Plc and Shell were the biggest boosts to the STOXX 600, up between 0.4% and 1.6%.

“Energy is considered to be value. So when you get a material jump in bond yields as we are seeing today, you tend to get to see energy outperforming because it is still trading relatively cheap to other sectors such as consumer discretionary and several others,” Cicione said.

He added that upbeat earnings from U.S. peer Halliburton might also be lifting energy majors on hopes that peers can follow suit.

Meanwhile, the International Monetary Fund and the World Bank slashed their forecast for global economic growth by nearly a full percentage point, as Russia presses ahead with its war in Ukraine.

“Any suggestion that Ukraine tensions are going to be prolonged, or more violent, is enough to mute sentiment in markets,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

France’s CAC 40 fell 0.8%. President Emmanuel Macron’s lead in voting intention polls for the second-round election runoff on April 24 widened further on Tuesday, polls showed.

While the earnings season for companies in Europe has so far been mixed, focus will be on firms reporting this week such as Accor and L’Oreal.

First quarter earnings for companies on the STOXX 600 are expected to rise 24.7% from a year ago, according to Refinitiv.

Scor fell 5.2% after the French reinsurer said it expects to book charges for claims related to the Ukraine conflict.

Polish video game maker CD Projekt slid 10% as yet another game delay overshadowed full-year earnings beat.

(Reporting by Anisha Sircar in Bengaluru; Editing by Shounak Dasgupta)

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