Europe close: Stocks drop late on as Treasury yields rise

(Sharecast News) - European stocks gave up earlier gains and finished lower Tuesday afternoon after a weak Wall Street start, as another sell-off in US government debt tempered investors' appetite for equities.

After rising as much as 0.7% just after the midday mark, the pan-European Stoxx Europe 600 index sank into the red by the close, finishing 0.2% lower at 637.72. Gains in Frankfurt and Milan were offset by falls in Paris, London, Madrid and Zurich.

Oil prices eased slightly on Tuesday, with Brent futures for December delivery (the November contract expires on Tuesday) down 1.4% at $96.47 a barrel on the back of a much-needed rebound in supplies from Saudi Arabia.

However, ongoing diplomatic efforts between the US and Iran continue to keep investors cautious. Officials from the two nations reportedly held separate talks with mediators on Monday despite US president Donald Trump's rejection of a truce plan that would reopen the Strait of Hormuz.

The late drop in European stocks was largely attributed to another rise in US Treasury yields, with the 10-year at a 2007 high of 5.265% and the 30-year at a 2004 high.

"This sharp increase in borrowing costs has weighed on equity prices, as investors continue to factor in the increasing likelihood of at least one more 25-basis point Fed rate hike before year-end," said David Morrison, senior market analyst at Trade Nation.

"While a pullback in oil prices could see yields slip, there's also the problem that the government has competition when it comes to selling its debt from the giant hyperscalers which are desperate to raise huge sums for AI infrastructure spending."

Closer to home, eurozone economic sentiment deteriorated in September, marking the first decline in five months, according to figures from the European Commission on Tuesday. The Commission's Economic Sentiment Indicator fell by 0.5 points to 97.9, moving further below its long-term average of 100. The indicator had been trending higher since May.

In equity news, shares in Lindt & Spruengli fell as the chocolate maker cut its 2026 organic growth forecast for the second time this year, citing subdued consumer sentiment and rising price sensitivity that together with a European heatwave hurt demand.

Julius Baer jumped after Swiss financial regulator FINMA said it had concluded enforcement proceedings against the bank, lifting or relaxing restrictive measures against it.

Semiconductor-related names were among the top performers after a report that Anthropic's public offering was expected to value the company at more than $2trln. Infineon Technologies, BE Semiconductor Industries, ASM International and ASML Holding all jumped.

Germany shipping giant Hapag-Lloyd rose strongly after upgrading its full-year profit forecast on the back of strong demand and higher freight rates.