European shares, euro fall as energy shock, fiscal worries bite
SPY•European stocks and the euro fell on Wednesday as Brent crude rose 1% to $101.58 a barrel amid renewed Middle East tensions and fiscal concerns. The STOXX 600 was down 0.45%, and the euro slipped 0.47% to $1.1208.
1. Stocks and oil
European stocks weakened despite a record-setting U.S. session, with the STOXX 600 down 0.45%. Brent crude rose 1% to $101.58 a barrel as markets weighed supply constraints from a storm approaching U.S. oil-producing regions and attacks by Yemen's Iran-backed Houthis on Saudi Arabia.
2. Euro and French debt
The euro fell 0.47% to $1.1208 as investor concerns over energy costs and fiscal sustainability weighed on the currency. The spread between French and German government bond yields widened to 131 basis points after narrowing for two days; it reached almost 160 basis points last week. Political uncertainty before France's 2027 election and expectations of higher European Central Bank rates have pressured French bonds.
3. U.S. yields watched
The U.S. 10-year Treasury yield rose 3.8 basis points to 5.307%. Investors were watching a 10-year Treasury auction later Wednesday and a 30-year auction on Thursday for signs of demand for U.S. debt. Traders cut expectations of a Federal Reserve rate increase this month to 19% from about 50% a week earlier.
