European stocks slip as bond yields extend rise

Reuters

European stocks slip as bond yields extend rise

Oct 7, 2024 at 9:15 am GMT

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Higher yields weigh on stocks

ECB seen cutting rates again in Oct

Luxury stocks rise on China optimism

Updated at 0851 GMT

By Sruthi Shankar and Paolo Laudani

Oct 7 (Reuters) -European stocks slipped on Monday as the initial euphoria over strong U.S. jobs data last week faded and rate-sensitive sectors such as real estate and utilities came under pressure from higher bond yields.

The STOXX 600 index .STOXX was down 0.2% as of 0851 GMT, with real estate .SX86P and utilities .SX6P sectors losing 1.1% and 0.5%, respectively.

Banking shares .SX7P were a bright spot, rising 0.3%.

Euro zone government bond yields extended their rise, with the German 10-year bond yield DE10YT=RR trading at a one-month high of 2.26%, after Friday's blowout U.S. labour market data dispelled fears of a recession and spurred a sharp paring of rate-cut expectations. GVD/EUR

"There is hope from the jobs figures that the U.S. won't go into recessions. But, at the same time, there's disappointment there won't be another super-sized rate cut," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Traders now see a bigger chance of a 25 basis-point Federal Reserve cut rate cut in November, a stark shift from last week when most were betting on a large 50 bps move.

Meanwhile, they have nearly fully priced in another 25 bps cut by the European Central Bank (ECB) later this month as inflationary pressures are easing faster than policymakers had expected.

The ECB will probably cut rates on Oct. 17 as economic growth is weak and this raises the risk that inflation will undershoot its 2% target, French Central Bank Chief Francois Villeroy de Galhau told an Italian newspaper.

Investor morale in the euro zone unexpectedly rose in October after three consecutive months of decline, boosted by rising expectations even as dissatisfaction with the current situation hit a new low this year, a survey showed.

Among stocks, Richemont CFR.S rose 0.9% after the Cartier owner agreed to sell its Yoox Net-A-Porter (YNAP) online fashion and accessories business to German luxury fashion platform Mytheresa 0FVy.MU.

Luxury stocks were broadly higher, with French names including Kering PRTP.PA, LVMH LVMH.PA and Hermes HRMS.PA up between 0.9% and 2.4%, signalling continued optimism over China's stimulus measures to revive its economy.

European luxury firms draw a large part of their revenue from China.

Shares of Heidelberg Materials HEIG.DE climbed 0.8% following a report that the Adani Group is in talks to buy the German company's Indian cement operations a deal that could be worth about $1.2 billion.

Reporting by Sruthi Shankar in Bengaluru and Paolo Laudani in Gdansk; Editing by Sherry Jacob-Phillips

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