European shares fell sharply in morning trading on Tuesday as a sell-off in global bond markets led investors to trim their risk exposure.The pan-European FTSEurofirst 300 index was down 1.6 percent at 1,570.88 points by 0836 GMT and Germany's DAX fell 1.8 percent, with investors trimming their trading equity positions following a sharp rise in bond yields.
"It's a matter of concern for the market," Ian Richards, global head of equities strategy at Exane BNP Paribas, said.
"When any particular asset class goes through periods of extreme volatility in a short space of time, people feel the pressure to take their risk exposure lower. Of course, there is an overlap from what may be a bond market event into the equity space."
German Bund yields rose as a global sell-off in bond markets resumed. The sell-off has puzzled investors and analysts since the end of April. Traders have blamed it on a rise in inflation expectations, higher oil prices, and restricted liquidity, but the full picture is far from clear.
"Should the weakness in bonds and emerging market currencies continue to intensify in the days ahead, it will be just a matter of time till major stock markets around the world will come under additional pressure also," said Markus Huber, senior analyst at Peregrine & Black.
WHAT CANNOT GO ON FOREVER WON'T.
THE GLOBAL STOCK MARKETS RISE OVER THE LAST FEW YEARS HAVE BEEN THE RESULT OF CENTRAL BANK INTERVENTIONS, AND NOT BASIC ECONOMIC GROWTH.
THIS GLOBAL BOND SELL-OFF COULD SIGNAL THAT THIS IS THE BEGINNING OF THE END...