European stocks closed lower Wednesday as yields climbed on both sides of the Atlantic. The main catalyst came from the U.S., where the flash composite PMI jumped to 58.4 from 56.0. Stronger growth gives the Fed room to keep policy restrictive, while persistent price pressures give it a reason. Richmond Fed President Tom Barkin said Tuesday that inflation could prove stubborn, and Fed Governor Michael Barr said Wednesday that further policy adjustments are likely to be needed. (www.richmondfed.org)
Europe’s flash PMIs also showed continued expansion: all eight manufacturing and services readings for France, Germany, the eurozone and the UK were above 50. Eurozone services rose to 53.0 from 51.6, beating the 51.4 estimate, while manufacturing held at 52.7. Services improved sharply in Germany to 52.9 from 49.7 and in France to 51.4 from 48.0. Manufacturing eased in both countries but remained above 50. In the UK, manufacturing improved to 52.0, while services slowed to 51.7.
The growth readings were encouraging, but the rise in yields won out for stocks. The European closes were:
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Germany’s DAX: 25,410.64, down 0.66%
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France’s CAC 40: 8,123.42, down 0.39%
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UK’s FTSE 100: 10,705.25, down 0.03%
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Spain’s IBEX 35: 19,632.20, down 0.62%
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Italy’s FTSE MIB: 51,897.50, down 0.21%
Germany’s 10-year yield rose 11.6 basis points to 3.560%, France’s rose 16.8 basis points to 4.660%, and Italy’s rose 16.0 basis points to 4.506%. The U.S. 10-year Treasury yield was up 11.6 basis points to 5.083% in the supplied snapshot.
The U.S. dollar was higher against all seven major currencies. The euro fell 0.48% to 1.1392, the pound fell 0.68% to 1.3248, and USDJPY rose 0.57% to 158.27. The Australian dollar was the weakest of the group, down 1.07%, followed by the New Zealand dollar, down 0.94%. Higher U.S. yields helped support the dollar as traders considered the possibility of further Fed hikes.
Gold and silver moved the other way. Gold fell $76.70, or 1.76%, to $4,282.80, while silver dropped $2.49, or 3.72%, to $64.53. Rising yields increase the appeal of interest-bearing assets relative to precious metals, and a stronger dollar adds another headwind.
Oil was the exception among the commodities in the snapshot. WTI rose $2.91, or about 3.24%, to $92.75 after bottoming near a technical swing level at $88.72. For traders, that level now offers a nearby reference point: holding above it keeps the rebound intact, while a move back below it would weaken the buyers’ case.
U.S. stocks were also lower at the time of the snapshot, with the Dow down 0.60%, the S&P 500 down 0.64% and the Nasdaq Composite down 1.02%. The market’s message was clear: growth remains firm, but traders are weighing that strength against inflation, a stronger dollar and higher borrowing costs.
