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European Stocks’ Stellar Start to Year Unravels in Sharp Selloff

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The biggest weekly selloff since the U.S. presidential election has erased European stocks’ gains for 2018.

The Stoxx Europe 600 Index dropped 1.4 percent at the close on Friday, with miners leading a broad-based retreat. In a rout prompted by concern about rising government bond yields, the benchmark has erased an annual gain that had reached 3.5 percent just over a week ago. Stocks are down for a fifth day, following their best start to a year since 2015.

A global stock and bond rout that swept Europe in its wake this week has seen key regional benchmarks give up their 2018 gains, including Germany’s DAX Index and the Swiss Market Index. France’s CAC 40 Index and the broader Euro Stoxx 50 Index are less than 1 percent away from erasing their advances.

“People are finally starting to reprice reflation, it’s about time,” Jeanne Asseraf-Bitton, head of global cross-asset research at Lyxor Asset Management, said by phone. “Global economic growth is strong and corporate earnings are very solid, so there’s no reason to question the equity bull market. The rise in bond yields is good, it’s just the speed at which it’s happening that is making investors nervous. Bottom line: this is a healthy correction.”

The Stoxx 600 on Friday fell the most since September 2016, extending its weekly decline to 3.1 percent. Yields on U.S. 10-year Treasury notes topped 2.8 percent after strong jobs data boosted bets the Federal Reserve will lift rates next month. Some market watchers see a 3 percent level as a potential trigger for a correction in equities.

— With assistance by Elena Popina

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