Europe midday: Losses extend, oil above $92 as bonds, US-Iran tensions weigh

(Sharecast News) - European shares fell sharply on Tuesday amid renewed tensions between the US and Iran while rising bond yields also raised concerns among investors.

The pan-regional Stoxx 600 index was down 0.70 to 646 at 1110 GMT. Germany's DAX was down 1.16%, the UK's FTSE 100 fell 0.77%, while France's CAC 40 declined by 0.34%.

Brent crude climbed above $92 a barrel as Iran attacked two US bases in Jordan on Monday in retaliation for an American strike on Larak Island with Washington claiming to have targeted two Iranian rocket launchers.

A tanker was also struck in the Strait of Hormuz on Monday. US President Donald Trump issued his usual threat of a military response, saying: "We are going to hit them hard."

Elsewhere, global bond yields hit new highs on Tuesday as inflationary fears and looming rate hikes hit sentiment.

"September will also be a big month for the global bond markets. The Bank of Japan and the ECB are expected to raise interest rates in the coming weeks, while there is a growing chance that the Fed could join them," said XTB research director Kathleen Brooks.

"Bond yields are rising on Tuesday and have been led higher by the Japanese 10-year yield, which crossed the 3% barrier overnight. The rapid rise in Japanese yields could soon see Japanese debt yield more than European debt. Germany's 10-year yield is currently only 33 basis points higher than Japan's 10-year yield, which highlights the major shift in fiscal risk that we have seen in recent months."

On the economics front, growth at factories in the eurozone hit its fastest pace in more than four years. S&P Global's eurozone purchasing managers' index climbed to 52.7 last month from 51.9 in July, its highest reading since May 2022, but just below a preliminary reading of 52.8. Any reading above 50 points to expansion.

In equity news, shares in Partners Group slumped as the Swiss private equity firm released results and said CEO David Layton would be moving to an investment role and be replaced by Roberto Cagnati and Juri Jenkner as co-chief executives.

Reckitt Benckiser was also higher after an Illinois court ruled in favour of its Mead Johnson unit in a trial alleging that its baby formula was linked to a deadly bowel disease in premature babies.

Reporting by Frank Prenesti for Sharecast.com