European shares fell across the board on Wednesday as government bond yields reversed Tuesday’s retreat and crude oil held above $100 a barrel, with Federal Reserve minutes for September due later in the day. The pan-European STOXX 600 was down about 1 percent near 630 points, close to its lowest level since mid-June, while Milan fell hardest among major European markets.
Italy’s FTSE MIB closed near 49,900 points, a 2.5 percent drop that took the index under the 50,000 mark for the first time since early June. The 10-year Italian government bond yield hit its highest level since October 2023, pushing the BTP-Bund spread to about 115 basis points, data from the Milan exchange and Il Sole 24 Ore showed. French debt sold off too after the spread between French and German 10-year yields widened again to near 140 basis points, within reach of last week’s 160-basis-point peak. The euro slipped toward $1.118, not far above the 17-month low of $1.1161 set earlier in the week.
Bond market does the damage
The 10-year US Treasury yield rose more than 8 basis points in early trading to 5.356 percent, its highest level since April 2002, and the 30-year yield reached 5.725 percent, a level last seen in May 2002. Stocks that had closed at record highs on Tuesday gave up the gains quickly. At 9:43 a.m. in New York the S&P 500 was down 0.56 percent near 7,775, according to Reuters. The Dow had shed roughly 470 points and the Nasdaq about 0.85 percent. Tuesday had been a different story: the S&P 500 set its first record close in two months at 7,819 and the Nasdaq at 27,600 as AI-linked chip stocks rallied and yields briefly eased.
Crude added pressure rather than relief. Brent traded above $100 a barrel and up more than 1 percent during the session, supported by continued Houthi attacks on Saudi territory and a storm threatening US production areas in the Gulf of Mexico. WTI held near $90. Energy shipments through the Strait of Hormuz have recovered in recent weeks, which limits the upside, but the market has not priced out supply risk. Vitol chief executive Russell Hardy said this week that roughly 12 million barrels per day of crude and 2 million barrels per day of refined products left the Middle East by tanker in the last seven to 10 days.
What the Fed minutes may show
The Fed raised rates by 25 basis points in September, its first increase since 2023, and the minutes due at 2 p.m. Eastern are expected to detail how divided the committee was. Traders put about 19 percent odds on another hike at the late-October meeting, down from roughly 50 percent a week earlier after soft inflation data, with a December increase close to fully priced, CME FedWatch data showed. A $39 billion auction of 10-year notes on Wednesday afternoon gives investors a direct read on demand for long-dated debt at yields not seen in more than two decades.
Earnings are the other pillar under the market. Analysts expect third-quarter S&P 500 earnings growth of about 30 percent, led by energy at more than 110 percent and technology near 66 percent, according to LSEG data cited by Reuters. PepsiCo reports Thursday, Delta Air Lines on Friday, and the big US banks the following Tuesday. FactSet counted a record 72 companies with positive guidance for the quarter, most of them in technology, which is where higher bond yields cut hardest through discount rates.
Rate expectations split across Europe
The selloff lands on different central bank stories at the same time. Markets had been pricing roughly 75 basis points of ECB hikes and 85 basis points of Fed hikes by the end of next year before Wednesday’s session, according to Alliance News commentary on the Milan close. In the UK, elevated gilt yields and inflation at 3.1 percent in August keep a November Bank of England hike in play, with UK 10-year yields above 5.4 percent and the 30-year gilt near 5.7 percent. British CPI prints are due next week, and the BoE meets in early November.
Fiscal worries remain the slow-burn risk in Europe. France’s 2027 budget aims to cut the deficit below 5 percent of GDP under a minority government, and spread pricing has stayed elevated since the draft was submitted on October 1. Paris faces budget votes in the National Assembly later this month, and the market has yet to decide whether the arithmetic holds. Milan’s own underperformance owes something to its fiscal position: the 10-year BTp yield at its highest since 2023 with the spread near 115 points leaves bank balance sheets, a core reason Milan had outperformed since spring, exposed to the same repricing.
For crypto and risk markets the read-through is direct. Bitcoin traded below $84,000 on Wednesday after forced liquidations, with the same yields and oil mix weighing on high-duration assets. Thursday brings Fed speakers and more earnings, but the nearer catalyst is the minutes text.
“In the very early stages of the fourth quarter, markets are being driven by a confusing stocks up, US breadth down, yields up, oil down and up, and down narrative,” said Jeremy Batstone-Carr, an economist at Raymond James, in comments carried by Reuters.
The STOXX 600’s drop leaves it close to last week’s low of about 625 points. German industrial production due Thursday and euro-area refinancing data will arrive against a backdrop where every basis point in the long bond market is being repriced against an AI-driven earnings cycle. Bond yields, not earnings, set the tone for the next session.