ROME: European stock markets closed sharply lower on Thursday, marred by a renewed bout of bond-market volatility and jitters over Greece’s bailout talks with international lenders.
The Stoxx Europe 600 index SXXP, -0.83% ended 0.8% lower at 392.65, extending its losing streak into a third straight day.
Bond-market carnage: Early in the session, the benchmark was hit by a rally in European bond yields that came a day after European Central Bank President Mario Draghi said that investors would have to get used to volatility in financial markets. The yield on the 10-year German bund TMBMKDE-10Y, -5.86% jumped to as high as 0.99%, its highest level since September, before erasing the day’s rise and falling back to 0.83%.
Draghi also said ECB economists now expect consumer prices to rise by 0.3% this year, having previously projected they would be unchanged.
Christoph Rieger, a strategist at Commerzbank, said inflation rising faster than expected, coupled with a resolution in Greece; the U.S. economy recovering swiftly; and the ECB not being “bothered by higher volatility” would create “the perfect storm” for yields.
