European Stocks Retreat as Bond Yields Surge Ahead of Inflation Data

European stock markets experienced a broad decline on Thursday, driven by rising global bond yields, which heightened investor concerns ahead of the eagerly anticipated inflation data release at the end of the week.

Early in the trading session, Germany’s DAX index fell 0.3%, the UK’s FTSE 100 dropped 0.2%, while France’s CAC 40 managed a slight gain of 0.1%.

Rising Yields Fuel Market Jitters

The negative sentiment across European markets mirrored the weakness seen on Wall Street and in Asian markets overnight. Rising U.S. Treasury yields, fueled by persistent inflation worries, have led to expectations of prolonged high-interest rates, adding to market jitters.

The two-year U.S. Treasury yield approached the 5% mark on Thursday, while the 10-year yield hovered near its highest levels in weeks.

Data released on Wednesday revealed a higher-than-expected rise in German consumer prices for May, intensifying the focus on the upcoming eurozone inflation data release on Friday.

The European Central Bank is widely expected to cut interest rates next month, but uncertainty surrounding the subsequent path of monetary policy is causing unease among investors.

In the U.S., market participants eagerly awaited the release of gross domestic product (GDP) data later in the session and, more importantly, the PCE price index data, the Federal Reserve’s preferred inflation gauge, on Friday. Several Fed officials have expressed the need for more significant progress on inflation before considering rate cuts.

BHP Abandons Anglo American Deal

In corporate news, shares of BHP Group slid 1.7% after the mining giant decided not to pursue a formal offer for Anglo American, withdrawing from its $49 billion takeover bid. BHP cited an inability to reach an agreement with Anglo American on concerns related to South African regulatory risk and cost, as well as a lack of “key information” to address these risks.