European stocks moved lower on Thursday as investors weighed rising energy costs, higher government bond yields and renewed worries about economic growth.
The pan-European STOXX 600 declined 0.8% to 625.44 points by 0833 GMT. Financial stocks were among the biggest decliners, with European banks falling nearly 2% to their lowest level in more than three months.
Deutsche Bank, Banco Santander, Societe Generale and UniCredit each fell for a second straight session.
Financial shares came under pressure as euro zone government bond yields approached recent highs. Investors are increasingly concerned that higher energy prices could drive inflation higher while also weighing on economic activity.
Oil prices climbed more than 3% on Thursday after attacks on shipping in the Gulf and Strait of Hormuz heightened concerns over supplies from the Middle East. Rising energy costs are making the outlook more difficult for central banks because higher fuel prices can increase inflation at a time when economic growth is facing pressure.
Ipek Ozkardeskaya, senior analyst at Swissquote, said concerns about European debt combined with higher energy prices were weighing on expectations for economic growth.
France’s CAC 40 was among the weakest major indexes, falling 1% to a six-month low. Investors have placed greater attention on France’s fiscal position, with the country’s budget deficit exceeding 5% of gross domestic product.
Government bonds issued by heavily indebted countries, including France and Italy, also faced selling pressure. Investors moved toward safer German government bonds, leaving borrowing costs higher elsewhere.
The market conditions are creating a challenging environment for European financial institutions. Banks remain sensitive to shifts in interest rates and economic expectations, while weakness in sovereign debt markets can heighten concerns about credit and funding conditions.
Energy companies were among the few sectors to gain as crude prices climbed. Shares in the sector advanced alongside the rise in oil.
Investors are also evaluating the impact of recent Federal Reserve policy decisions. Minutes from the U.S. central bank’s September meeting showed policymakers were divided over whether further rate increases would be necessary.
Attention is now shifting toward the European Central Bank and how policymakers might respond if energy-related inflation stays elevated while economic growth deteriorates.
The latest decline highlights the interconnected risks facing European markets, as energy security, government borrowing costs, inflation and monetary policy continue to shape asset prices at the same time.
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