European shares down over risk of higher inflation

European shares fell 1% on Monday as hopes of a vaccineled global economic recovery fuelled a rally in commodities and raised concerns over the risk of higher inflation.

The pan-European STOXX 600 index was on course for its worst day this month, led by declines in technology companies and retail stocks. Germany’s benchmark stock index fell the most among its European peers, down 1.3%. Yields on Germany’s benchmark 10-year bond jumped to their eightmonth high, putting upward pressure on borrowing costs in the euro area. Britain’s FTSE 100 dropped 1%, while investors awaited Prime Minister Boris Johnson’s plan to gradually reopen the battered economy.

Meanwhile, focus is likely to turn to European Central Bank chief Christine Lagarde’s speech later in the day and U.S. Federal Reserve Chairman Jerome Powell’s semi-annual testimony before Congress on Tuesday.

In company news, security firm G4S dropped nearly 10% to the bottom of the STOXX 600 index after Canada’s GardaWorld said it would not raise its offer further. British pub operator Mitchells & Butlers fell 1.5% after it reported a plunge in sales as all its sites have been forced shut under the latest lockdown, and launched an open offer to raise 351 million pounds ($491.47 million). French car parts maker Faurecia fell 1.5% even as it targeted its sales close to 25 billion euros and an operating margin above 8% of sales by 2025.

in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan went flat, after slipping from a record top last week as the jump in U.S. bond yields unsettled investors. Japan’s Nikkei recouped 0.8% and South Korea 0.1%, but Chinese blue chips lost 1.4%.

Oil prices have gone along for the ride, aided by tightening supplies and freezing weather, giving Brent gains of 22% for the year so far. Brent crude futures were up 0.7% at $63.33 a barrel. U.S. crude added 0.7% to $59.65. All of that has been a boon for commodity-linked currencies, with the Canadian, Australian and New Zealand dollars all higher for the year so far.