European stocks flat as bond sell-off and Middle East strikes rattle markets

Stock News | 01/09/2026

European equities were little changed on Tuesday as a deepening global bond market sell-off and renewed military hostilities in the Middle East weighed on appetite for risk assets, while investors also looked ahead to inflation and labor market data that could shape central bank expectations in Europe and the U.S.

The pan-European STOXX 600 was flat. Germany’s DAX fell 0.6%, France’s CAC 40 rose 0.1%, and London’s FTSE 100 slipped 0.4%.

While energy producers registered gains, they were outweighed by broad selling across continental exchanges. Traders were also contending with rising sovereign borrowing costs, the risk of cost-push inflation, and major economic data releases due later in the day.

Global bond rout accelerates as Japanese yields surge

The market move was led by Asia, where the Japanese 10-year government bond yield climbed to its highest level in a generation.

That sharp increase prompted a global repricing of interest-rate curves, pushing U.S. Treasury yields and European sovereign yields higher as investors demanded greater term premia amid persistent inflation concerns and heavy debt issuance.

Higher yields hit rate-sensitive sectors especially hard across Europe, including technology, real estate and high-dividend utilities, as rising discount rates reduced the relative appeal of equity valuations. In practice, that kind of move tends to spill across markets because government bond yields help anchor borrowing costs and discount rates used to value everything from corporate earnings to property assets.

Trump threatens more strikes after missile exchange

Geopolitical tensions worsened after a fresh military escalation between U.S. forces and Iran.

Iran launched overnight missile strikes targeting two U.S. military bases in Jordan, in response to American air strikes against Iranian targets earlier in the week.

Following the exchange, U.S. President Donald Trump warned of possible additional military strikes against Iranian infrastructure, dashing hopes for an immediate ceasefire or a diplomatic resolution to secure commercial shipping routes through the Strait of Hormuz.

The escalation pushed energy commodities higher and raised fears that prolonged supply disruptions in the Persian Gulf could keep energy costs elevated and add to inflationary pressure across European supply chains, particularly for industries that rely heavily on imported fuel and freight.

Eurozone CPI and U.S. JOLTS in focus

August euro zone Consumer Price Index (CPI) data are expected to confirm persistent underlying inflation pressures, reinforcing market expectations for another 25-basis-point interest rate increase from the European Central Bank at its policy meeting next week.

Markets are also waiting for the July U.S. Job Openings and Labor Turnover Survey (JOLTS), which will offer an early read on labor market tightness ahead of Friday’s nonfarm payrolls report and the Federal Reserve’s September rate decision.

On regional exchanges, Germany’s DAX and France’s CAC 40 were both in negative territory, pressured by industrial, automobile and consumer stocks. The FTSE 100 held up somewhat better, supported by its heavy weighting in major integrated oil and mining companies.

Source: Investinng.com