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European Stock Markets Set for Slightly Higher Open as Bond Yields Rise

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European stock markets are expected to open slightly higher on Tuesday after cautious gains at the start of the week, despite bond selling that sent US Treasury yields to their highest levels in years. The benchmark 10-year US Treasury note yield reached its highest level since 2007, while the 30-year yield hit its highest level since 2011. The rise in bond yields generally leads to lower stock prices.

Rupert Thompson, the chief economist at Kingswood Group, highlighted the potential downside risk to equities from these bond yield levels. He stated in an interview with CNBC’s “Squawk Box Europe”: “If there is a further downside risk to equities over the coming months, I would say it’s coming from bond yields at these kinds of levels.” Thompson also noted the increased competition equities are now facing from cash and short-dated bonds, which are yielding 5% or more in the US.

The rise in bond yields is a reflection of improving economic conditions, particularly in the US. As interest rates increase, bond yields rise, which can make fixed income investments more attractive compared to stocks. This can lead some investors to shift their money away from equities and into bonds.

Despite the potential impact on stock prices, European markets are expected to open on a positive note. This follows cautious gains seen at the beginning of the week. Investors will be closely monitoring the situation, especially the bond market, for any further developments that may influence stock prices in the coming months.

The rise in bond yields has implications beyond the financial markets. It also affects borrowing costs for governments, companies, and individuals. Higher yields mean higher borrowing costs, which can impact economic growth by reducing investment and consumer spending. Central banks, including the Bank of England, will be monitoring the situation closely and may adjust their monetary policies accordingly.

Overall, the rise in bond yields and its potential impact on stock prices is a significant development in the global financial markets. While European markets are set to open higher on Tuesday, the situation is fluid and could change rapidly. Investors should stay informed and be prepared for potential fluctuations in stock prices as bond yields continue to rise.

More detail via CNBC here… ( Image via CNBC )

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