Shares struggle, bond yields jump after bright economic data

European stocks fell on Tuesday and bond yields jumped after a pick up in euro zone business activity this month fuelled predictions that the European Central Bank would remain hawkish as inflation stays stubbornly high.

Euro zone business activity gathered steam, expanding much faster than thought, according to a survey, buoyed by a growth in services even as the manufacturing sector shrank.

Germany’s 2-year bond yield , which is the most sensitive to interest rate expectations, hit a 14-year high of 2.95%. It was last up 3 basis points at 2.923%.

The Euro STOXX 600 (.STOXX) fell as much as 1% before clawing back some of its losses, and was last down 0.4%. German (.GDAXI) and French (.FCHI) shares also lost about 0.3% respectively.

Also weighing on Europe’s benchmark index was Europe’s biggest bank HSBC Holdings Plc (HSBA.L), which fell 1% on a cautious outlook even as its quarterly profit surged.

“The combination of better-than-expected economic activity at the start of the year and service sector inflationary pressures which remain elevated will likely keep the ECB in hawkish mode,” analysts at ING wrote in a note.

This report’s information was first seen on REUTERS; to read more, click this link.