European Shares Closed Lower as Bond Yields Rose And Inflation Worries

European stocks retreated from nearly a year highs on Wednesday as riskier assets shied away due to concerns about a potential inflation spurt and rising bond yields, while Gucci owner Kering led losses after announcing a drop in sales.

The pan-European STOXX 600 index closed 0.7% lower, while the London average stock index, the Financial Times 250, fell 1.3% after data showed British inflation rose slightly more than expected in January.

The prospect of higher inflation in the near term and higher debt yields prompted investors to expect monetary policy measures from major central banks that may put pressure on the prices of riskier assets.

German bond yields rose to their highest levels in nearly a year on bets on an acceleration in inflation, and US yields reached similar peaks.
It was an unprecedented accommodative monetary policy and stimulus that pushed the STOXX 600 up more than 50% after its sharp collapse due to the Corinthia virus in March.

However, the index’s performance is lower than its US counterpart due to concerns about companies being affected by the long closures, as well as the difficulties that have marred the distribution of vaccines across the euro area.

Incorporate news, French Kering Group shares tailed the performance of the Stoxx 600 after it said that sales of its Gucci brand fell 10.3% in the fourth quarter of 2020.

The European retail sector index lost 3.1% and was the worst performer among its peers.