European Stocks Slump Amid Rising Bond Yields and Hawkish Central Banks

European stocks are on track for their first monthly decline in six months due to rising bond yields, which have reduced investor appetite for risk assets. The pan-European STOXX 600 index was up 0.4% at 640.36 points by 0844 GMT, but is down 1.7% for the month and nearly flat for the third quarter.

The surge in global bond yields has been driven by several factors, including an energy-price shock from the Iran war, deteriorating government finances, and a glut of issuances that have prompted major central banks to raise interest rates or adopt a more hawkish stance this month.

Chris Beauchamp, chief market analyst at IG Group, said 'Everything got off on the wrong foot with Jackson Hole (in late August)... (Fed chief) Kevin Warsh was more hawkish than we expected and put us on a path of a rate hike, and that just set the tone for the entire month.'

Despite this, oil prices have surged nearly 14% for the month, making it set for its biggest climb since July. Energy shares are down roughly 1%, but are still on track to end the month with a 3.7% gain.