European markets cautious after Wall Street sell-off

LONDON — European stocks were muted on Wednesday as investors monitored rising bond yields and a slew of corporate earnings.

The pan-European Stoxx 600 was flat in early trade, with utilities shedding 0.8% while retail stocks jumped 2.3% on the back of a strong round of earnings reports.

The cautious trade in Europe comes after a sell-off on Wall Street triggered by surging bond yields sent global markets lower in the previous trading session.

U.S. bond yields continued their year-to-date climb on Tuesday with the 10-year Treasury topping 1.89%, its highest level in 2 years. The 10-year yield started the year around 1.5%. Meanwhile, the 2-year rate — which reflects short-term interest rate expectations — topped 1% for the first time in two years. Bond yields move inversely to prices.

Investors remain jittery over the U.S. Federal Reserve’s schedule for hiking interest rates and tightening its ultra-loose pandemic-era monetary policy.

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Major U.S. averages also fell sharply Tuesday after Goldman Sachs missed analysts’ expectations for its fourth-quarter earnings. Big bank earnings continue on Wednesday with reports from Bank of America and Morgan Stanley slated before U.S. trading starts.

U.S. stock futures were steady in overnight trading while Asia-Pacific markets fell on Wednesday following the sell-off on Wall Street.

The U.K. inflation rate soared to a 30-year high in December, the Office for National Statistics said Wednesday, as higher energy costs, resurgent demand and supply chain issues continued to drive up consumer prices.

Inflation hit an annual 5.4%, its highest since March 1992 and up from 5.1% in November, itself a decade high. Economists polled by Reuters had expected an increase of 5.2%.

Earnings in focus

Corporate earnings were a key driver of individual share price action in Europe on Wednesday, with Richemont, WH Smith, JD Wetherspoon and Burberry among those reporting.

Richemont shares jumped 8.6% to lead the Stoxx 600 in early trade after the Swiss luxury goods giant posted a sharp rise in quarterly sales, fueled in particular by jewelry.

Burberry also reported a strong set of results and lifted its profit outlook on the back of accelerating full-price sales growth. The British luxury fashion house’s shares traded 6.3% higher in early deals.

At the bottom of the European blue chip index, Telecom Italia fell 4.8%.

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— CNBC’s Maggie Fitzgerald contributed to this market report.

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