European Shares Near One-Month Low Amid Economic Concerns

European shares dropped 1.5% to a one-month low, driven by concerns over public finances and debt sustainability in major economies. The STOXX 600 index fell, with rate-sensitive property stocks and banking stocks leading the decline. Yields on 30-year German and French bonds rose to their highest levels since 2011 and 2009, respectively.

European shares experienced a significant decline on Tuesday, dropping 1.5% to a one-month low, driven by escalating concerns over public finances and debt sustainability in major economies. The STOXX 600 index (.STOXX) fell, with rate-sensitive sectors such as real estate (.SX86P) and banking stocks leading the downward trend. The decline was exacerbated by a rise in bond yields, with 30-year German and French bonds hitting their highest levels since 2011 and 2009, respectively [1].

Investors are increasingly worried about the fiscal pressures in Europe and around the world, leading to a selloff in longer-dated German and French bonds. This has caused bond yields to rise, which inversely affects bond prices. The European Central Bank (ECB) has indicated that it will keep interest rates steady despite these developments, citing the euro zone's resilience in the face of U.S. tariffs and potential inflation [3].

The STOXX 600 index, which tracks the performance of 600 leading European companies, ended the day at 543.35 points, marking a 1.47% drop. The real estate sector was particularly hard hit, losing 3.5% and reaching a nearly five-month low. In contrast, the luxury sector (.STXLUXP) was the only sector to post gains, rising by 0.5% as fashion giants Kering (PRTP.PA) and LVMH (LVMH.PA) were both upgraded to "buy" from "hold" by HSBC [1].

Among individual stocks, Swiss food giant Nestlé (NESN.S) dipped 0.7% after its Chief Executive Laurent Freixe was removed for failing to disclose a romantic relationship with a subordinate. Meanwhile, Ferrari (RACE.MI) ended 1.9% higher as Deutsche Bank raised its rating on the sports car maker to "buy" from "hold". InPost (INPST.AS), a Polish parcel locker company, dropped 12.5% after reporting a fall in quarterly core earnings and a slowdown in core earnings growth [1].

The European bond market is expected to see significant issuance in September and October, with over 100 billion euros ($117 billion) planned. This could further pressure bond yields and, consequently, equity markets. The ECB's decision to keep interest rates steady, despite rising bond yields, suggests a cautious approach to fiscal policy, which could have implications for European economic growth [1, 3].

References:

[1] https://www.reuters.com/markets/europe/stoxx-600-ends-near-one-month-low-bond-yields-rise-fiscal-woes-2025-09-02/
[2] https://www.reuters.com/markets/europe/central-bank-chief-says-longer-france-waits-tackle-debt-more-painful-it-will-be-2025-09-02/
[3] https://www.tradingview.com/news/reuters.com,2025:newsml_L6N3UP0II:0-europe-s-stoxx-600-hits-three-week-low-as-bond-yields-rise-nestle-drops/