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(Reuters) -European shares fell for a fifth straight session on Tuesday, pressured by a rise in government bond yields globally, with investors worrying about a potential recession and the impact on corporate profits from a rapid rise in interest rates.
The region-wide STOXX 600 index was down 0.5% by 0816 GMT.
Longer-term U.S. Treasury yields shot higher in Asia, as bonds globally were sideswiped by a headlong rout in the UK gilts market amid fears pension funds were being forced into fire sales of assets.
The Bank of England (BoE) on Tuesday announced a move to purchase inflation-linked debt until the end of this week, to stem a collapse in Britain’s 2.1 trillion pound ($2.31 trillion) government bond market. London’s FTSE 100 index slipped 0.5%.
Adding to woes, data showed Britain’s unemployment rate fell to its lowest since 1974 at 3.5% in the three months to August, driven by a record jump in the number of people leaving the labour market, which the BoE is worried will fuel inflation pressures.
“This could embolden the Bank of England to maintain its own aggressive hiking policy…complicating an overall outlook where the economy is still expected to hit recessionary levels sooner rather than later,” said Richard Hunter, head of markets at interactive investor.
The STOXX 600 index has lost 20.4% year-to-date amid concerns about a tough winter in Europe due to an energy crisis fuelled by Russia-Ukraine war and aggressive monetary policy tightening by central banks that may hamper economic growth.
Focus now turns to the third-quarter earnings season to gauge the health of corporate Europe at a time when inflation is running at a record 10% and data suggest the continent is headed into a recession.
“The most important part of earnings season will be the forward guidance from companies rather than the earnings themselves,” said Edward Park, chief investment officer at Brooks Macdonald Asset Management in London.
“Particularly, attention will be paid to some of the industrial bellwethers to gauge whether economic growth momentum in their view is starting to slow,” Park said.
Miners as well as oil and gas sectors declined 1.8% each, as commodity prices fell on demand concerns due to a flare-up in China’s COVID-19 cases.
Among the big movers, Givaudan slid 6.1% after the Swiss fragrance and flavour maker reported its third-quarter results, missing expectations on top-line growth.
Brenntag SE dipped 4.3% after Stifel cut its price target on the German chemical company’s stock.
Var Energi slumped 8.8% after the Norwegian oil firm revised its full-year guidance downwards.
Qiagen (NYSE:QGEN) jumped 6.4% after a report the German genetic testing company and U.S.-based diagnostics group Bio-Rad Laboratories (NYSE:BIO) were in talks to merge.
Sanofi (NASDAQ:SNY) rose 1.8% after the healthcare company and its partner Regeneron (NASDAQ:REGN) presented more positive data for their Dupixent product to treat Eosinophilic esophagitis.
