European Stocks Decline Amid Rising Bond Yields

European stocks experienced a decline on Monday, influenced by a rise in government bond yields and concerns over potential interest rate cuts by the European Central Bank. Dassault Aviation’s shares also contributed to the losses, dropping due to the company’s failure to meet its targeted number of aircraft deliveries.

The European STOXX 600 index retreated 0.1 percent by 0934 GMT, reversing an initial 0.2 percent gain during early trading.

Government bond yields in the euro zone saw an increase, driven by positive investor response to comments from Philip Lane, the chief economist at the European Central Bank. Lane warned against a hasty reduction in interest rates, emphasizing the potential for such a move to trigger a new wave of inflation.

The ten-year German bond yields, considered the euro zone benchmark, stabilized at 2.184 percent in the latest trading session.

Economic forecasts suggest a potential interest rate cut of about 150 basis points in the coming year.

Commerzbank shares rose by 1.5 percent following news of merger talks with Deutsche Bank. However, overall banking shares declined by 0.4 percent, with HSBC witnessing a 2.1 percent drop.

Dassault Aviation faced a significant setback, with its shares plummeting by 5.6 percent. The French aircraft manufacturer announced that its aircraft deliveries for 2023 fell short of the targeted numbers.