Europe midday: Shares pare losses but still in red on inflation fears

European shares pared early-session losses on Tuesday after an overnight sell-off in the US and Asia on fears of rising inflation, a Chinese economic slowdown due to Covid lockdowns and the continuing war in Ukraine.

The pan-European Stoxx 600 index was down 0.64% after being down 1.14% in early deals, with all major regional bourses in the red.

US treasury yields continued to rise, with the two-year yield moving above 2.5%, closing in on the 10-year benchmark. Investors are fretting over the risks of a global recession and now looking at the next batch of inflation figures from the US and Germany.

Oil prices moved back over the $100 mark after Opec’s warning yesterday that future and current sanctions on Russian oil would create one of the world’s worst ever supply shocks.

The oil producing cartel told European Union officials that it would not be possible to offset the potential loss of up to seven million barrels a day of Russian oil.

Brent crude stood at over $100.98 a barrel after sharp falls on Monday over fears that Covid lockdowns in the Chinese city of Shanghai would hit demand. It was the first time in a month that Brent had been below $100 a barrel.

In Britain, official data showed the jobless rate slipped further below its level immediately before the coronavirus pandemic.

In equity news, shares in Deutsche Bank and Commerzbank were sharply lower after an undisclosed investor on Monday evening sold stakes of more than 5% in the German lenders.

Low-cost airline easyJet rose after reporting strong second quarter trading and a positive outlook for summer, despite flight cancellations over the Easter holiday break due to staff contracting Covid-19.

Rolls-Royce shares slumped after JP Morgan downgraded the aero engine maker’s shares to ‘underweight’ from ‘neutral’.

Diploma shares surged almost 9% to top the Stoxx after the specialist seals and controls maker said full-year results were expected to “materially exceed” expectations after a strong contribution from acquisitions.

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