European indices closed mixed in quiet trading with U.S. markets shut for Labor Day. Higher oil prices lifted energy shares but pushed European bond yields up, adding pressure ahead of Thursday's expected ECB rate decision.
Germany's DAX slipped 0.15% to 26,006.53, while France's CAC 40 gained 0.33% to 8,306.15. The U.K.'s FTSE 100 eased 0.08% to 10,822.13, Spain's Ibex fell 0.14% to 20,021.80, and Italy's FTSE MIB rose 0.25% to 52,230. The pan-European Stoxx 600 finished near unchanged at 649.90.
Oil rally cuts both ways for equities
Energy shares were among the day's better performers as Brent crude moved closer to $100 per barrel. European technology shares also got a boost from a strong rally in Asian semiconductor stocks. Healthcare, however, was pressured by a 3.2% decline in Novartis after disappointing drug-trial results.
But rising energy costs can keep inflation elevated and add pressure on central banks to raise rates, and that concern helped push European yields higher and limited enthusiasm in the broader equity markets. Germany's DAX lagged modestly amid political uncertainty following the AfD's election victory in Saxony-Anhalt.
France's CAC 40 moved higher after recently coming under pressure from concerns about the country's fiscal outlook.
Yields rise across the board
Benchmark 10-year yields moved higher across Europe: Germany added 4.9 basis points to 3.39%, France rose 4.0 basis points to 4.25%, the U.K. climbed 4.0 basis points to 5.18%, Spain added 5.5 basis points to 3.83%, and Italy rose 7.0 basis points to 4.22%. Since bond prices and yields move in opposite directions, the move represents selling in the European debt market.
The catalyst is renewed concern that rising energy prices will keep inflation elevated and force central banks to maintain tighter policy. The ECB is widely expected to deliver a 25-basis-point interest rate hike on Thursday. Deutsche Bank is forecasting another 25-basis-point increase in December.
Higher yields can weigh most on growth companies, whose expected earnings sit further into the future.
Source: Investinglive RSS Breaking News Feed
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