European stock markets opened the new month with broad declines, as all major indices faced losses. The UK’s FTSE dropped 1.2%, Spain's IBEX fell 1.0%, Germany's DAX decreased by 0.6%, and France’s CAC 40 was down 0.7%. The Italian FTSE MIB also lost 0.7%.
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The primary concern driving these declines is the bond market, where 10-year Treasury yields briefly reached 5.31%, the highest level since 2007, before settling around 5.30%. This rise in yields results in uncomfortable borrowing costs for equities, especially following the worst quarter for Treasuries since 1994.
In addition to bond yields, oil prices also traded lower earlier, with WTI crude dipping briefly below $89, though it has rebounded to $90.87. This volatility reinforces concerns about inflation risks associated with elevated energy prices.
Despite these challenges, there was some positive news in the tech sector. Strong earnings from Micron led to gains in AI-related stocks across Japan and South Korea overnight. Additionally, US futures have shown some strength, with S&P 500 futures up by 0.5% and Nasdaq futures increasing by 1.1% this morning.
Overall, while Micron’s earnings provided a glimmer of optimism, the prevailing sentiment remains cautious as the bond selloff continues without signs of stabilization, leaving equities susceptible to further pressure.