By Julien Ponthus
LONDON (Reuters) - European shares traded slightly lower on Wednesday morning, with most sectors except financials in the red as concerns grew over the direction of the bond market after the 10-year U.S. Treasury went above 2.55 percent for the first time since March 2017.
Germany's 10-year bond yield also hit its highest since an October European Central Bank meeting, when policymakers first announced the extension of its bond-buying scheme.
At 0850 GMT, the STOXX 600 (STOXX) index was down 0.2 percent while the FTSE (FTSE) edged up 0.1 percent as a lower sterling helped British dollar earners.
"Calls for a slightly negative open can be attributed to Asian equities losing steam despite another quartet of Wall St records, as some call a bear market for bonds (yields up, prices down) and a market turnaround", Accendo Markets analysts told their clients.
"Have we finally entered a bond bear market?", Rabobank also asked this morning, while DNB noted that "yields weigh on dividend sectors".
Banks gained as higher interest rates typically generate more revenues and profits for lenders.
RBS (L:RBS) rose 2.5 percent, Deutsche Bank (DE:DBKGn) was up 2 percent and HSBC (L:HSBA) added 1.5 percent.
Energy stocks also added a few points to the index as oil prices stayed robust due to production cuts and a fall in U.S. inventories.
European pharmaceuticals, utilities and consumer staples fell as the rise in bond yields dimmed the appeal of their stable dividends. Steel producers were the biggest fallers among basic resources (SXPP).
Among individual stocks, Metro Bank (L:MTRO) was the top gainer after an upgrade from Citi.
By contrast, IG Group (L:IGC) was one the biggest faller, down 4.7 percent following conclusions of a review of the contracts-for-difference market by the UK's FCA.
Outside the STOXX, smaller UK financial spreadbetters fell, like CMC Markets (L:CMCX) and Plus500 (L:PLUSP), down 5.5 percent and 3.4 percent respectively.
Still in the UK, Sainsbury (L:SBRY) was up 1.5 percent after the supermarket group reported a slight beat to forecasts for Christmas sales and said it was nudging up full-year profit guidance.