European markets struggle for momentum between rising U.S. bond yields

January 6, 2021: -On Wednesday, European stocks were trading slightly higher as global markets kept an eye on U.S. bond yields.

The pan-European Stoxx 600 index struggled for momentum, trading up 0.1%, with most sectors in good territory apart from utilities, technology, media, financial services, and food and beverages.

Online supermarket Ocado was a good performer on the index, up 5%, while Vitrolife was not a good performer, down 4%.

European markets are following the broadly negative trend set in Asia-Pacific overnight. Investors closely monitor interest rates in the bond market, with U.S. Treasury yields increasing at the fastest new year pace in two decades. The benchmark 10-year U.S. Treasury yield increased to as high as 1.71% on Tuesday, last sitting at 1.6455%.

The 10-year yield is essential since it influences lending rates for mortgages and other business and consumer loans. When bonds sell off, products, or interest rates, go higher.

Investors wait for the release of the Federal Reserve’s minutes from its December meeting on Thursday. In the previous month, the central bank announced that it would speed up the tapering of its bond-buying program and forecast three interest rate hikes for 2022.

Therefore, U.S. stock futures were flat in overnight trading on Tuesday after the Dow Jones Industrial Average notched a record close as investors flocked to shares that stand to benefit from an economic recovery.

On Wednesday, data released in Europe include final PMI (purchasing managers’ index) data for the euro zone’s services and manufacturing industries in December and Italian consumer confidence data or December.