[European Market]30-year German bond yields continue to rise 3.22% – stocks fall for the first time in three months – Bloomberg

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European Markets Plummet as Long-Term Interest Rates Surge and Trump Launches Tariff Threats

On Tuesday, July 11th, the European bond market witnessed a significant rise in long-term interest rates, stabilizing a bare-steep yield curve. The German 30-year bond yield climbed by two basis points, marking its highest level since 2011. Meanwhile, European stocks experienced a steep decline following President Trump’s threat of imposing a flat 15-20% tariff on most countries.

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Interest Rate Concerns and Market Reactions

Persistent fiscal concerns are causing a stir in the European bond market. According to Bloomberg Automation, the German 30-year bond yield rose to 3.22%, indicating the largest weekly increase in four months. German bonds increased their yields by 14 basis points, approaching levels not seen since 2011. This spike in yields has prompted discussions within the market about possible interest rate cuts.

The European Central Bank (ECB) director, Isabel Schnabel, recently commented that significant reductions in inflation rates are necessary before considering rate cuts. Consequently, the swap market’s anticipation of further rate cuts within the year dropped to 19 basis points from the previous day’s 21 basis points, down further from 27 basis points a week ago.

British Bonds and GDP Slide

Parallel to these events, the British bond market showed similar steepening, canceling out the recent upward moves caused by the UK’s contracting GDP in May. The UK 10-year debt yield increased by three basis points to 4.62%.

European Stocks React to Tariff Threats

The European Stocks 600 index plunged by 1%, marking its sharpest decline in three months. Key sectors that saw the most significant drops included healthcare and consumption-related services and products. Luxury brands such as Kering and Moncler, which are sensitive to potential tariffs, also experienced notable devaluations.

The European markets overview on July 11th demonstrated significant fluctuations. The closing prices and percentage changes for major indices were as follows:

• Stocks European 600: 547.34 (-1.01%)
• FTSE 100: 8941.12 (-0.38%)
• DAX: 24255.31 (-0.82%)
• CAC 40: 7829.29 (-0.92%)

Evergreen Context: Understanding Yield Curves and Tariffs

Yield Curves: A yield curve is a graphical representation of the yields (interest rates) for bonds with different maturities. A bare-steep yield curve indicates that long-term rates are significantly higher than short-term rates, often signaling concerns about future economic conditions.

Tariffs: Tariffs are taxes imposed by a country on imported goods. They can influence global trade dynamics by making imported products more expensive, potentially causing local manufacturing to boom or international trade tensions to rise.

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