European equities slip to multi-week lows as yields climb

European equities extended their decline on Wednesday, with several regional benchmarks slipping to multi-week lows.

The move was broad-based, leaving almost every sector in negative territory, as expectations of tighter monetary policy in major economies pushed government bond yields higher and ongoing tensions in the Middle East eroded risk appetite.

Meanwhile, oil companies could remain supported by elevated crude prices.

The two-year yields in Germany and France have reached multi-year highs, with ten-year yields at levels not seen for decades, as rising energy costs and stronger central bank rhetoric reinforce expectations of a tighter monetary policy. Persistent price pressures have left market participants positioning for an interest rate hike from the ECB this month.

Focus now shifts to next week’s ECB decision on rates. Friday’s US non-farm payrolls report could inject volatility beforehand. Geopolitical developments will also be monitored closely, as any de-escalation could help drive energy prices lower and ease pressure on equities.