European stock markets experienced a decline on Thursday as increasing government bond yields and a significant rise in crude oil prices heightened concerns about inflation and interest rate outlooks. Brent crude futures surpassed $104 a barrel after reports indicated that the White House sought military strike options against Iran from the Pentagon, potentially for action before the US midterm elections. This situation raised fears of escalating tensions between Washington and Tehran, which could disrupt energy supplies.
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Alongside rising crude prices, US Treasury yields approached multi-decade highs. Minutes from the Federal Reserve's September monetary policy meeting suggested unanimous support for an interest rate increase before the end of 2026. The yield on the benchmark 10-year Treasury note neared 5.32%, while the 30-year yield was around 5.71%. The combination of increasing borrowing costs and higher energy prices negatively affected investor sentiment across European equity markets.
Adding to the market pressure, weaker-than-expected German trade figures were released. Data from Germany's Federal Statistical Office indicated that exports unexpectedly fell by 0.8% in August from the prior month, following a 0.5% decrease in July. In contrast, imports rose by 0.9% in August, recovering from a 5.5% drop in July. These numbers contributed to worries about the outlook for Europe's largest economy amid high financing costs and global trade uncertainty. Germany's DAX Index fell 0.9%, while France's CAC 40 dropped 0.4%. In London, the FTSE 100 decreased by 0.1%, with banking stocks among the laggards as eurozone government bond yields approached recent highs. Shares in Commerzbank, BNP Paribas, and Lloyds Bank declined as investors assessed the impact of heightened yields and persistent inflation.
Individual companies also faced difficulties. Argenx recorded a substantial decline after announcing the discontinuation of its Phase 3 UNITY clinical trial evaluating efgartigimod SC in adults with moderate-to-severe Sjögren's disease. This decision significantly affected the company's shares as investors reacted to the implications for its clinical development program. Bayer also saw a decrease in its stock value despite the US Food and Drug Administration accepting its supplemental New Drug Application for KERENDIA.