Inflation and Bond Yields Affected European Stocks

There are many factors that have the potential to affect stocks, and let’s have a look a the European stocks. It is worth noting that, European stocks ended flat on Wednesday, with gains in economy-sensitive sectors offset by a rise in bond yields as investors raised their inflation expectations for the year.

Interestingly, consumer-oriented automobile and travel stocks were the day’s best performers. Importantly, the British stocks strengthened their positions after finance minister Rishi Sunak extended emergency programs to support the economy through the COVID-19  pandemic.

Moreover, a strong outlook from Stellantis boosted the automobile sector.

People should keep in mind that, the pan-European STOXX 600 index ended largely unaltered after opening stronger, with utility stocks leading losses in the euro zone.

As a reminder, utilities are often considered as proxies for bonds and are sold off when debt offers relatively higher yields.

Importantly, European bond yields rose on March 3. At the same time, a market gauge of long-term euro zone inflation expectations rose to its highest level since May 2019.

Stocks on Wednesday

It is worth noting that, healthcare and shares also serious losses. As a reminder, the focus turned away from defensive stocks and towards sectors more likely to benefit from an economic recovery.

Interestingly, healthcare performed well during difficult periods in the market. Moreover, the conditions improved and people are considering general recovery areas which are benefitting from a recovery economy.

Countries are working hard to cope with the coronavirus pandemic. Notably, hopes of COVID-19 vaccines spurring a return to economic normality drove optimism about euro zone business activity. As a result, it reached the highest point in three years in an IHS Markit survey.

Interestingly, German stocks ended about 0.3% higher as investors anticipated a gradual easing of coronavirus curbs as a sluggish vaccination campaign accelerates. Nevertheless, falls in major technology stocks helped to drag them from a record high hit earlier in the session.

It is worth noting that, automobile supplier Continental soared 5.4% after UBS upgraded its rating to “buy”. According to the bank “attractive” value creation from the company’s plans to spin off its powertrain unit Vitesco.

Moreover, the Swiss logistics group Kuehne & Nagel International rose 7.1% to the top of the STOXX 600 as it notched up record full-year operating profit. Last but not least, shares in U.K. insurer Hiscox Ltd dropped 11.8% to the bottom of the Stoxx 600.