European shares were on course for their first monthly decline in six months on Wednesday as rising inflation risks linked to the Middle East conflict pushed global bond yields higher and raised concerns over the outlook for interest rates, according to a report by Reuters.
The pan-European STOXX 600 was up 0.7% at 642.69 points by 0722 GMT, but was set to end September down around 1.5%. The index was also heading for a nearly flat performance in the third quarter.
Bond yields weigh on equities
According to Reuters, a surge in global bond yields to multi-decade highs has put pressure on equity markets in recent weeks as investors assess the potential impact of higher energy prices on inflation and interest rates.
The conflict in the Middle East has intensified concerns that disruptions to energy supplies could keep oil prices elevated, complicating efforts by central banks to bring inflation back towards target.
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Oil prices edged higher on Wednesday after U.S. President Donald Trump denied that he was prepared to ease sanctions on Iran, while Qatar continued to push for peace talks.
Bond markets showed some signs of stabilising, however, with the benchmark 10-year German Bund yield easing for a second consecutive session.
Inflation data in focus
Investors were also assessing fresh economic data from across Europe.
Britain's economy grew faster than previously estimated in the second quarter, while France's inflation rate in September came in above expectations. Germany's inflation data for September, due later on Wednesday, is expected to provide further clues on the direction of price pressures in Europe's largest economy, the report stated.
The data comes as investors closely monitor whether higher energy costs could translate into broader inflation, potentially limiting the scope for monetary easing.
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Mining stocks gain
Mining shares were among the strongest performers on the STOXX 600, helped by gains in Boliden and Rio Tinto.
Glencore rose 1.4% after the company received approval to continue operations at its Hunter Valley thermal coal project in Australia until 2045.
Media stocks, meanwhile, were among the weaker sectors and weighed on the broader index. The moves came as European equities remained caught between support from individual sectors and broader pressure from rising borrowing costs and uncertainty over the inflation outlook.
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