Europe shares subdued at close as bond yields weigh

The pan-European STOXX 600 was down 0.1% at 578.38 points at close

European shares closed subdued on Monday, with higher bond yields weighing slightly on the main index.

The pan-European STOXX 600 was down 0.1% at 578.38 points at close. Some regional indexes were mixed, with London’s FTSE 100 down 0.23% and Spain’s IBEX 35 up 0.1%.

Real estate stocks were the biggest drag on the main STOXX index, down 1.6%, pressured by a spike in long-dated government bond yields across the globe amid concerns about fiscal sustainability.

Germany’s 30-year yield increased to 3.466%, after jumping more than 10 basis points last week to its highest level since July 2011.

Moves were further influenced by better-than-expected German industrial production data and hawkish comments from influential rate-setter Isabel Schnabel, who hinted that the next move from the European Central Bank (ECB) may be an interest rate hike, rather than a cut.

Consumer staples stocks weighed, with Unilever down 2%. The consumer goods giant completed its Magnum demerger, resulting in the latter getting listed as the Magnum Ice Cream Company with a valuation of around €7.8 billion.

L’Oreal declined 2% after the French company said it will double its stake in Swiss skincare firm Galderma to 20%. Galderma shares were up 1%.

On the flip side, industrials rose 0.6%, led by defence firms. Rheinmetall advanced 3.6%, while the broader index rose 1.6% to lead sectoral gains.

The sector has been sensitive to headlines on progress on the Russia-Ukraine war. It logged steep declines in November as a ceasefire looked imminent, but recouped some ground as uncertainty set in.