UKX FTSE 100 Index

By Carla Mozee and Sara Sjolin, MarketWatch

German Ifo business sentiment takes gloomy tinge; William Hill shares slide

European stocks erased an earlier gain and ended lower on Tuesday after U.S. 10-year Treasury yields jumped to the psychologically important 3% level, which is seen as a headwind for equities.

How markets are moving

The Stoxx Europe 600 index fell 0.02% to close at 383.11. The pan-European benchmark traded around its highest level earlier in the day, but lost momentum in the final hours of the trading day.

On Monday, the benchmark rose 0.4% (http://www.marketwatch.com/story/european-stocks-struggle-as-pmis-fail-to-provide-a-lift-2018-04-23) and finished at its highest level since Feb. 2.

Germany's DAX 30 index fell 0.2% to 12,550.82, while France's CAC 40 index ended 0.1% higher at 5,444.16.

The U.K.'s FTSE 100 bulked up by 0.4% to 7,425.40, scoring a sixth straight win (http://www.marketwatch.com/story/ftse-100-looks-for-6th-win-as-oil-shares-rise-pound-falls-2018-04-24). The London benchmark was boosted by the energy sector as oil prices rose.

The euro bought $1.2227, up from $1.2209 late Monday in New York.

The yield on Germany's 10-year bund rose 0.3 basis points to 0.631%, according to Tradeweb data, as prices fell.

Check out:Why the premium for German bonds over Treasurys is the widest in 30 years (http://www.marketwatch.com/story/why-the-premium-for-owning-german-bonds-over-treasurys-is-at-the-widest-in-30-years-2018-04-23)

What's driving the market

European stocks lost grip of their gains after the U.S. 10-year interest rate -- considered the world's most important bond-market indicator -- climbed to 3% for the first time since 2014. Higher yields typically weigh on stocks as bonds start to offer better returns than equities and push up borrowing costs for companies.

Many European companies operate and borrow money in the U.S. and therefore are also impacted by the U.S. yields.

Oil shares stood out as best performers, sending the Stoxx Europe 600 Oil & Gas Index climbing by 1.2%. The moves came as Brent crude prices traded above $75 a barrel (http://www.marketwatch.com/story/brent-oil-breaks-above-75-on-fears-iran-sanctions-are-looming-2018-04-24), the highest since 2014, as tensions between Saudi Arabia and Yemen heated up.

Also, speculation that U.S. sanctions on Iran will be put back in place in May helped push up Brent and oil prices .

What strategists are saying

"Government bonds continue to fall out of favor with investors, sending yields higher. Will U.S. 10-year Treasurys yielding 3% bring about an immediate collapse in equity markets? The answer from today was an unequivocal no. The tone across markets was cautious, but nothing akin to the drop in February when Treasury yields rose above 2.9%," said Jasper Lawler, head of research at London Capital Group in a note.

Stocks in focus

Banco Santander SA (SAN) shares fell 3.3% even as the Spanish lender's first-quarter net profit rose 10% to 2.05 billion euros (http://www.marketwatch.com/story/santander-net-profit-rises-10-beating-forecasts-2018-04-24) ($2.51 billion), surpassing analysts' expectations of about EUR2.03 billion, according to FactSet consensus estimate.

William Hill PLC shares (WMH.LN) tumbled 13% after a report by The Times newspaper (https://www.thetimes.co.uk/article/hammond-accepts-2-limit-for-addictive-gambling-machines-wvqhcln95) that the U.K. government is set to reduce the maximum bet to GBP2 for fixed odds betting terminals

Ams AG (AMS.EB) shares dropped 9% after the chip company, who counts Apple Inc. (AAPL) as a customer, issued a disappointing forecast.

SAP SE (SAP.XE)(SAP.XE) shares gained 3.5% after the German software maker raised its 2018 outlook (http://www.marketwatch.com/story/sap-lifts-outlook-on-callidus-deal-strong-quarter-2018-04-24) to reflect the acquisition of Callidus Software Inc. and a strong first-quarter operating performance.

Which data are in focus?

The Ifo business climate index fell to 102.1 points (http://www.marketwatch.com/story/german-businesses-sentiment-declines-in-april-ifo-2018-04-24) from 103.3 points in March, below economists' forecasts of 102.6 points. The Ifo business climate index now includes the services sector. "The upbeat mood in Germany's executives' suites is evaporating," said Ifo President Clemens Fuest.

Investors will be eager to hear what European Central Bank President Mario Draghi will say about the eurozone economy on Thursday when the ECB releases its next policy decision. Draghi reportedly said on Friday that the region's growth cycle may have peaked.

Check out:Expect a careful, dovish Mario Draghi at the ECB meeting (http://www.marketwatch.com/story/expect-a-careful-dovish-mario-draghi-at-next-weeks-ecb-meeting-says-hsbc-2018-04-18)

Also read: 4 scenarios for the ECB meeting on Thursday in one handy chart (http://www.marketwatch.com/story/4-scenarios-for-the-ecb-meeting-on-thursday-in-one-handy-chart-2018-04-24)

(END) Dow Jones Newswires

April 24, 2018 12:15 ET (16:15 GMT)

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