European equity markets are under greater pressure as higher bond yields, rising energy prices and persistent inflation concerns weigh on sentiment.
The FTSE 100 was trading around 10,733 points shortly after the open on 1 September, with weakness in cyclical shares offsetting support from major energy companies BP and Shell.
Base metals, consumer stocks and automotive-related names were among the main areas under pressure.
The main issue for the UK market is a lack of fresh positive catalysts. Inflation concerns remain in focus, while buyers are showing little urgency to increase exposure at current levels. That leaves the FTSE 100 in a consolidation phase, with the next move likely to depend on whether valuations become attractive enough to bring buyers back in.
Germany’s DAX is facing similar pressure, although it remains above the 26,000 level after reaching a record high the previous Friday.
Higher government bond yields are one of the main headwinds. Rising yields can make fixed-income assets more competitive with equities and can also put pressure on company valuations. At the same time, higher energy prices increase the risk of stronger cost pressures across the economy.
That combination raises the hurdle for further gains. Stronger earnings expectations or improving economic data may be needed to offset the pressure from yields and energy costs.
Technology shares remain an area of support. Semiconductor names including Nvidia and Micron attracted renewed interest after recent declines, while technology stocks also helped support trading in Asia. Slightly stronger-than-expected economic data from Japan added to the more constructive tone in parts of the market.
Within Germany, buying remained selective. Merck, Symrise and Infineon attracted interest, while RWE and Rheinmetall also saw demand before the open.
CMC Markets plc (LON:CMCX) is a UK-based financial services company that offers online trading in shares, spread betting, contracts for difference and foreign exchange across world markets.
