Bond yields rise, European stocks fall

European stocks fell on Tuesday, with the STOXX 600 index closing down 0.2%. The slight decline followed a slight gain of nearly 0.4% in the previous session. The downturn has been tempered by investors taking a more cautious stance as European government bond yields rise. While both the fundamentals and banking sectors posted sharp losses, down 1.4% and 0.8% respectively, the healthcare sector posted a second-day gain of 0.7% on Thursday, helping offset some of the overall market losses.

Healthcare stocks, which make up more than 15% of the STOXX 600 index, performed strongly and remain close to the 17-week high hit on Monday. These advances in health care bring stability despite broader distress in the market.

On the corporate front, shares in Spanish pharmaceutical company Grifols plunged 25.9% after Gotham City Research raised concerns about its accounting practices. Grievous has since denied the accusations of financial misconduct.

In economic news, German industrial production unexpectedly fell in November, falling for the sixth consecutive month. Germany’s DAX 40 index also ended down 0.2%, while the 10-year German government bond yield rose to 2.188%.

In contrast, the Eurozone unemployment rate unexpectedly fell to 6.4% in November, missing expectations of rising to 6.5%. Commenting on the labor market, Melanie Debono, senior economist at the European Central Bank (ECB), said tighter conditions would not hinder a slowdown in wage growth or the central bank’s ability to cut interest rates.

Amid mixed global economic data, market expectations for the European Central Bank’s future policy rate cuts have moderated, and the European Central Bank is expected to suspend interest rate cuts at its upcoming meeting.

Attention is also turning to the United States, where earnings season is about to begin, with an inflation report due on Thursday expected to weigh on global stock markets.

In terms of market forecasts, UBS adjusted its 2024 target for the STOXX 600 to 450 points from the previous 410 points.

On the individual stock front, recruitment firm Hays fell 7.1% after warning that half-year profits would be lower than expected due to a slowdown in hiring. However, shares in Denmark’s Jyllands rose 3.8% after Barclays issued an “overweight” rating for the first time.

Other notable moves include Italy’s Pirelli shares rising 4.3% after executive vice president Marco Tronchetti Provera indirectly increased his stake in the company. At the same time, Bernstein downgraded the stock rating of chemicals giant BASF from “in line with the market” to “underperform”, and its shares fell 2.7%.

Reuters contributed to this article.

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