European stocks slumped Thursday, mirroring moves on Wall Street
and in Asia after U.S. Federal Reserve Chairwoman Janet Yellen
suggested the yearslong stock rally may have driven prices too
high.
Stocks have had a bumpy ride in recent days, hit by a broad and
fierce reversal in the direction of equity, debt and currency
markets, and on Thursday the Stoxx Europe 600 fell nearly 1% in
early trade, taking its losses since the start of May alone to
close to 3%.
Ms. Yellen made the remarks in a conversation with International
Monetary Fund Managing Director Christine Lagarde in Washington on
Wednesday.
"It's sometimes said that when policy-making, if you are
offending everybody you must be doing something right," strategists
at Rabobank wrote in a note. "Janet Yellen will be hoping that's
the case."
Germany's DAX declined 0.6% and France's CAC was down more than
1%, taking losses this month to 1.6% and 2.3% respectively.
The euro continued to climb against the dollar, hitting a
two-month high during the Asian session and was recently up close
to 0.2% at $1.136.
Elsewhere in currency markets, the British pound fell around
0.2% to a three-month low against the euro Thursday, as polls
opened for one of the most closely fought elections in recent U.K.
history. Sterling also edged lower against a weak U.S. dollar.
Although the pound has shown resilience in the lead-up to the
vote, strategists on Thursday said the currency would likely face
headwinds over the coming days, especially if no single party is
able to secure a majority, which could lead to lengthy negotiations
over a possible coalition.
"If heightened uncertainty weighs more heavily on the pound in
the near-term, it could create an attractive opportunity to buy the
pound on dips," said Lee Hardman, a strategist at Bank of
Tokyo-Mitsubishi UFJ.
London's FTSE 100 index was 0.7% lower in early trade.
In debt markets, government bonds continued to slump, with the
yield on the U.K.'s 10-year gilt rising to 2.007%. On Wednesday, it
surpassed the 2% mark for the first time since December.
German 10-year government bonds, or Bunds, were yielding 0.65%,
their highest in four months and comfortably higher than where they
were before the European Central Bank announced its massive
quantitative easing program in January.
Just over two weeks ago, the 10-year Bund yield hit an all-time
low of 0.05%, spurring predictions of zero or even negative yields
on the benchmark for European credit markets.
Write to Josie Cox at josie.cox@wsj.com
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