European shares slip as rising oil, bond yield weigh; Trump-Xi talks eyed

European shares dipped on Thursday (Sep 24) as oil prices climbed due to dwindling prospects of US-Iran talks, prompting euro zone bond yields to approach multi-year peaks and dampening risk appetite. The pan-European Stoxx 600 closed 0.55 percent lower at 636.43, with most regional bourses also in the red. Iranian officials exchanged communications with US envoys during the UN General Assembly, but both sides indicated little advancement toward resolving the conflict.

Yasser El-Shimy, a senior investment analyst at the Motley Fool, remarked, "I wouldn’t hold my breath for any quick resolution to the Middle East standoff. Both parties are quite intransigent, and their differences are irreconcilable."

Oil prices surged for the second consecutive day after a five-session decline, with Brent crude remaining above the critical US$100-per-barrel threshold. European energy shares were the top gainers, surging 1.1 percent. Consumer-oriented food and beverage and personal and household goods sectors registered modest gains of 0.7 percent and 0.2 percent, respectively. Healthcare stocks, traditionally seen as defensive investments, underperformed slightly compared to their peers.

Germany's 10-year government bond yield, serving as the benchmark for the euro zone, remained stable at 3.611 percent, slightly below a 17-year high reached last week. Elevated oil prices bolstered the argument for the European Central Bank to continue tightening monetary policy. Dan Coatsworth, head of markets at AJ Bell, noted, "It's not simply what's happening in the oil market.

Bond investors have also got the hump over high levels of government borrowing, persistent deficits, and a heavy pipeline of new bond issuance."

Investors are optimistic about a potential breakthrough from a summit between US President Donald Trump and Chinese President Xi Jinping. US Treasury Secretary Scott Bessent informed that the two nations have agreed to extend their trade truce until January 10. The leaders are anticipated to discuss a range of topics, including Taiwan, Iran, and artificial intelligence concerns during their meeting.

In Europe, technology shares constituted the most significant sector decline, falling by 1.6 percent. Industrial goods, which include defense stocks, also saw a drop of 1.4 percent. Among individual stocks, Shelly Group experienced a 4 percent increase following Schneider's announcement of a 1.2 billion-euro (US$1.4 billion) takeover bid for the Bulgarian smart-device maker. Vistry declined 3 percent after the British homebuilder revised its annual profit expectations due to a strategic overhaul.

The FTSE 100 in Britain was marginally lower, settling at 10,689.83 points. H&M shares decreased by 2 percent, despite the Swedish fashion retailer announcing a greater-than-expected rise in operating profit for the June-August quarter.