European shares fell on Thursday as banks dropped to a more than three-month low while a renewed selloff in government bonds and elevated oil prices raised concerns that persistent inflation could weigh on economic growth, Reuters reported.
The pan-European STOXX 600 index fell 0.9% to 624.24 points as of 0723 GMT, with financial stocks among the biggest drags.
European banks declined nearly 2%, extending losses for a second session. Deutsche Bank, Banco Santander, Societe Generale and UniCredit all fell as eurozone government bond yields moved closer to recent highs, raising concerns about borrowing costs and the broader economic outlook.
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According to Reuters, the pressure on European equities came amid a wider global bond selloff, with investors reassessing expectations for interest rates as inflation risks remain elevated. Higher yields can weigh on economic activity and increase financing costs for companies and consumers.
Oil prices added to market concerns, climbing more than 3% as persistent worries about Middle East supply pushed crude higher. A hurricane threat to US offshore operations also prompted production cuts, adding to concerns over global energy supplies.
The increase in energy prices has raised fears that inflation could remain sticky, potentially limiting the ability of central banks to ease monetary policy and increasing the risk of weaker economic growth.
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Markets are also assessing the outlook for US and European interest rates. Minutes from the Federal Reserve's latest policy meeting showed officials were divided over whether further rate hikes would be needed. Investors will now focus on the European Central Bank's latest meeting accounts for indications about the future path of euro zone monetary policy, Reuters reported.
Several ECB and Federal Reserve officials are scheduled to speak later on Thursday, while Bank of England Governor Andrew Bailey is also due to make remarks. Investors will be watching the comments for signals on how policymakers are assessing inflation, economic growth and the recent rise in bond yields.
Among individual stocks, Bavarian Nordic gained 2.9% after the Danish biotechnology company raised its 2026 revenue guidance and increased its forecast for its EBITDA margin.
Rising energy costs, higher bond yields, and interest rate uncertainty kept investors cautious, with banks particularly vulnerable to renewed pressure across European financial markets, Reuters reported.
(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)
