Key Takeaways
- European shares are set for their first monthly loss in six months.
- Inflation risks from the Middle East war are driving bond yields to multi-decade highs.
- Mining shares are among the gainers, while media shares are a drag.
European shares are poised for their first monthly decline in six months, as inflation risks stemming from the Middle East conflict are pressuring bond markets globally, leading to higher borrowing costs. The pan-European STOXX 600 index is expected to end the month with a 1.5% drop, marking the third quarter nearly flat.
The surge in global bond yields to multi-decade highs has put significant pressure on stocks, as investors brace for higher interest rates to combat inflationary pressures from surging energy prices. On Wednesday, the 10-year German bund yield eased for a second day, providing some respite from the recent market volatility.
Despite the overall negative trend, the British economy grew faster than previously thought in the second quarter, while France’s inflation reading for September came in higher than expected. Germany’s September inflation data, due later in the day, could offer further insights into the economic health of the region.
Mining shares were among the gainers, with Boliden AB and Rio Tinto leading the way. Glencore gained 1.4% after securing approval to continue operations at its Hunter Valley thermal coal project in Australia until 2045. However, media shares were a drag on the market, reflecting broader economic concerns.
The situation is further complicated by geopolitical tensions, with US President Donald Trump denying any willingness to ease sanctions on Iran, while Qatar is pushing for peace talks. Oil prices edged higher on Wednesday, adding to the inflationary pressures on the market.
The pan-European STOXX 600 index was up 0.7% at 642.69 points by 0722 GMT, but the overall sentiment remains cautious as investors await key economic data and geopolitical developments that could shape the market in the coming weeks.
