European equities slide as oil tops $107, yields hit 5.02%

European stock markets began the session broadly lower, with selling pressure particularly acute in Italy.

• Eurostoxx -0.6%
• Germany DAX -0.4%
• France CAC 40 -0.6%
• UK FTSE 100 -0.6%
• Spain IBEX -0.5%
• Italy FTSE MIB -1.2%

Risk aversion continues to dominate markets. Brent crude oil traded above $107 per barrel following fresh attacks on Saudi energy facilities this week, adding to supply worries. Meanwhile, the 10-year Treasury yield climbed above 5.02%, reaching levels not seen since 2007.

The simultaneous rise in oil and bond yields is stoking inflation concerns one day ahead of the Federal Reserve's monetary policy decision, where markets widely expect a 25-basis-point rate increase.

Italy's FTSE MIB led declines after a steep drop on Monday, with bank shares once again facing heavy selling. Technology stocks such as Prysmian and STMicroelectronics also lost ground in the previous session, but their declines on Tuesday were more limited for the Italian index.

Nonetheless, technology stocks stayed cautious and defensive following the widespread selloff in AI-related shares on Monday. Calls from prominent AI industry leaders to pause development have pressured semiconductor and infrastructure equities at the start of the week, and that caution continues to dampen sentiment broadly.

US equity futures also declined, with S&P 500 futures falling about 0.4% after a tech-driven drop on Wall Street on Monday. Nasdaq futures were down 0.3% in pre-market trading.

The current challenge for stocks is not a single factor but a confluence of pressures: oil above $100, Treasury yields exceeding 5%, a more hawkish Fed stance, and ongoing uncertainty around artificial intelligence.

Until at least one of these headwinds subsides, equity markets are expected to have difficulty mounting a sustained recovery or relief rally.