EUROPE MARKETS: DAX Drops 1% After Lift In Bond Yields Spooks Wall Street

By Carla Mozee and Sara Sjolin, MarketWatch

Credit Suisse shares rally after earnings

Investors shoved European stocks lower Wednesday in the wake of a selloff on Wall Street where equities were spooked by rising bond yields and mixed earnings reports.

How markets are moving

Germany's DAX 30 index was the worst performing among the major national indexes. It fell 1% to close at 12,422.30, suffering its biggest daily loss in a month.

France's CAC 40 index declined 0.6% to 5,413.30, while the U.K.'s FTSE 100 fell 0.6% to 7,379.32, breaking a six-session winning streak (http://www.marketwatch.com/story/ftse-100-drops-after-rising-bond-yields-spur-selloff-on-wall-street-2018-04-25).

The broader Stoxx Europe 600 index sank 0.8% to 380.18, pulling further away from its highest levels since early February logged earlier in the week.

The euro was buying $1.2176, down from $1.2233 late Tuesday in New York.

The yield on Germany's 10-year bund was flat at 0.630%, according to Tradeweb data, as prices fell.

Check out:Why the premium for German bonds over Treasurys is the widest in 30 years (http://www.marketwatch.com/story/why-the-premium-for-owning-german-bonds-over-treasurys-is-at-the-widest-in-30-years-2018-04-23)

What's driving the market

European stocks tumbled as traders globally fretted over a rise in U.S. borrowing costs. The 10-year U.S. Treasury yield on Tuesday touched the psychologically important 3% level for the first time in four years and continued higher on Wednesday to 3.012% (http://www.marketwatch.com/story/us-10-year-yield-blasts-further-past-3-flirts-with-highest-since-2011-2018-04-25).

U.S. bond yields have been rising on expectations that inflationary pressures could prompt the Federal Reserve to ramp up the pace of rate hikes, which would increase borrowing costs for companies and consumers. European bond yields have also been creeping higher. Higher yields can weigh on stocks as bonds start to offer better returns than equities and raise borrowing costs.

U.S. stocks also opened with losses (http://www.marketwatch.com/story/stock-selloff-set-to-continue-as-10-year-yield-blows-further-past-3-2018-04-25) on Wednesday, building on declines from Tuesday (http://www.marketwatch.com/story/dow-shapes-up-to-break-losing-streak-but-earnings-could-kill-the-buzz-2018-04-24) that were led by shares of industrial, basic materials and technology companies after some mixed earnings from Caterpillar Inc. (CAT) and 3M Co. (MMM).

Read:What it means for the market that the U.S. 10-year government bond yield hit 3% (http://www.marketwatch.com/story/heres-what-it-means-for-the-market-that-the-us-10-year-yields-3-2018-04-24)

(http://www.marketwatch.com/story/heres-what-it-means-for-the-market-that-the-us-10-year-yields-3-2018-04-24)Investors in Europe will tune into what the European Central Bank will say about economic growth in the eurozone on Thursday when the bank releases its monetary policy decision.

Read:4 outcomes for the ECB meeting, in 1 handy chart (http://www.marketwatch.com/story/4-scenarios-for-the-ecb-meeting-on-thursday-in-one-handy-chart-2018-04-24)

What are strategists saying?

"Equities continue to find it tough going at the moment, with solid losses in the U.K. and Europe and U.S. stocks moving into the red once more. Early signs of a possible stabilization before the U.S. open were seen, but stocks swiftly fell once more," said Chris Beauchamp, chief market analyst at IG, in a note.

"Earnings season continues to punish those with doubts about the global outlook, as Twitter found out to its cost. A premarket jump on headline earnings beats was sent brutally into reverse as the firm's outlook for the year struck a distinctly gloomy note. This is all very similar to Caterpillar last night, and the fact that such disparate companies are being treated in such a similar way speaks to a definite sense of unease among investors," he added.

Read:Caterpillar shares reverse gains to slide 6% after CFO says Q1 was peak for the year (http://www.marketwatch.com/story/caterpillar-shares-reverse-gains-to-slide-6-after-cfo-says-q1-was-peak-for-the-year-2018-04-24)

Stocks in focus

Osram Licht AG shares (OSR.XE) tumbled 17% after the German lighting maker late Tuesday cut its full-year target on earnings before interest, taxes, depreciation and amortization.

Kering SA (KER.FR) bounced 4.6% higher as the luxury goods maker said first-quarter revenue jumped 27% (http://www.marketwatch.com/story/kering-revenue-soars-as-gucci-keeps-up-success-2018-04-25), led by its flagship Gucci brand and "exceptional momentum" at Balenciaga.

Credit Suisse Group AG shares (CSGN.EB) (CSGN.EB) rose 3.6% as the Swiss lender said first-quarter net profit grew roughly 16% (http://www.marketwatch.com/story/credit-suisse-profit-up-16-beating-forecasts-2018-04-25) to 694 million Swiss francs ($709.1 million), beating expectations of 653 million Swiss francs.

"With these first-quarter results, we got off to a good start in our third and final year of restructuring," said Chief Executive Tidjane Thiam said in a statement.

Metro Bank PLC shares (MTRO.LN) slid 7.3% as the U.K.-based lender said its first-quarter profit increased more than fivefold to GBP6.4 million ($8.9 million), but that its capital position has weakened (http://www.marketwatch.com/story/metro-bank-profit-soars-capital-ratio-falls-2018-04-25).

Shire PLC shares (SHPG) (SHPG) fell 2.8%, turning lower in Wednesday trade. The drugmaker recommended shareholders accept (http://www.marketwatch.com/story/shire-seems-ready-to-accept-latest-takeda-offer-2018-04-24) an improved takeover bid from Takeda Pharmaceutical Co. (4502.TO)

(END) Dow Jones Newswires

April 25, 2018 12:18 ET (16:18 GMT)

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