European benchmarks closed lower Wednesday as bond yields climbed on both sides of the Atlantic, overshadowing stronger-than-expected growth data. Germany's DAX, France's CAC 40 and Spain's IBEX 35 all fell, while U.S. yields and the dollar rose on Federal Reserve rate-hike concerns.
Germany's DAX closed at 25,410.64, down 0.66%. The selloff came even as economic data pointed to continued expansion on both continents, because rising yields outweighed the good news for stocks.
Strong PMI data fuels rate-hike concerns
The main catalyst came from the U.S., where the flash composite PMI jumped to 58.4 from 56.0. Stronger growth gives the Federal Reserve room to keep policy restrictive, but persistent price pressures give it a reason to act. Richmond Fed President Tom Barkin said Tuesday that inflation could prove stubborn, and Fed Governor Michael Barr said Wednesday that further policy adjustments are likely to be needed.
Europe's flash PMIs also showed continued expansion, with all eight manufacturing and services readings for France, Germany, the eurozone and the UK above 50. Eurozone services rose to 53.0 from 51.6, beating the 51.4 estimate, while manufacturing held at 52.7. Services improved sharply in Germany to 52.9 from 49.7 and in France to 51.4 from 48.0, though manufacturing eased in both countries while staying above 50.
European indices close in the red
The growth readings were encouraging, but the rise in yields won out for stocks. Germany's DAX fell to 25,410.64, France's CAC 40 dropped 0.39% to 8,123.42, and the UK's FTSE 100 slipped 0.03% to 10,705.25. Spain's IBEX 35 fell 0.62% to 19,632.20, and Italy's FTSE MIB eased 0.21% to 51,897.50.
Behind the equity moves, Germany's 10-year yield rose 11.6 basis points to 3.560%, France's rose 16.8 basis points to 4.660%, and Italy's rose 16.0 basis points to 4.506%. The U.S. 10-year Treasury yield was up 11.6 basis points to 5.083% in the same snapshot.
Dollar strengthens, gold and silver retreat
The U.S. dollar was higher against all seven major currencies, with the euro down 0.48% to 1.1392 and the pound down 0.68% to 1.3248. Gold fell $76.70, or 1.76%, to $4,282.80, while silver dropped $2.49, or 3.72%, to $64.53, as higher yields increased the appeal of interest-bearing assets over precious metals.
U.S. stocks were also lower at the time of the snapshot, with the Dow down 0.60%, the S&P 500 down 0.64% and the Nasdaq Composite down 1.02%.
Source: Investinglive
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