PSO Pearson Plc

By Riva Gold and Kenan Machado 
   -- German government bond yields near 18-month high 
 
   -- Tech rally leads Asian markets higher 
 
   -- Federal Reserve, Bank of England speeches in focus 

European stocks and U.S. stock futures struggled Tuesday as government bonds faced renewed pressure ahead of fresh cues from central bank officials.

Futures pointed to a 0.1% opening loss for the S&P 500, on track to reverse Monday's modest advance. The Stoxx Europe 600 edged down 0.3% late morning, brushing off an upbeat lead from Asian markets as U.K. companies led declines.

Shares of Pearson PLC fell around 6% after the education publisher r educed its stake in book publisher Penguin Random House, while Marks & Spencer shares fell 4% after the British food and clothing retailer reported lower sales. The wider FTSE 100 index was down 0.8%, also hurt by a modest rise in the British pound.

A fresh rise in government bond yields meanwhile pressured shares of steady income-paying companies in Europe which tend to perform best in a low-yield environment. The real estate, health care and food and beverage sectors dragged down the Stoxx Europe 600, while autos, miners and banks--sectors that tend to be most geared to economic growth and higher government bond yields--outperformed.

That came as government bond yields rose Tuesday despite a fall in oil prices after Federal Reserve Bank of San Francisco President John Williams stuck to his view that the U.S. economy was healthy enough to raise interest rates one more time this year and to start trimming its balance sheet.

Yields on 10-year Treasurys rose to 2.388% from 2.371% on Monday, while 10-year German bond yields briefly climbed to as high as 0.572%, around their highest since around the start of 2016, from 0.539% on Monday. Yields move inversely to prices.

"There has a been a marked shift in the language from central banks," said Ryan Myerberg, portfolio manager at Janus Henderson. "We can see the powerful force keeping rates so low for so long is being unwound, but what it means for the near term is up for debate," he said, noting upcoming inflation readings, including Friday's U.S. consumer prices data, will be key for the direction of yields.

Central bankers around the world are scheduled to appear this week as investors watch for more cues on monetary policy. On Tuesday, European Central Bank official Benoît Cœuré will speak in Frankfurt, while the Bank of England's Chief Economist Andrew Haldane and Deputy Governor Ben Broadbent are also expected to make remarks.

Fed Gov. Lael Brainard is to speak in New York on Tuesday, ahead of Chairwoman Janet Yellen's testimony to congressional committees on Wednesday and Thursday. The Bank of Canada is also widely expected to raise its benchmark policy rate on Wednesday for the first time in seven years.

Earlier, Asian markets mostly climbed in low-volume trading as technology companies echoed gains in U.S. tech stocks on Monday.

Taiwan's Taiex index was up 1.2%, with iPhone lens maker Largan Precision adding 3.8% and fellow Apple suppliers Hon Hai Precision and Taiwan Semiconductor gaining 2.6% and 2.9% respectively.

In Japan, index heavyweight and tech investor SoftBank gained 2%, while the benchmark Nikkei Stock Average was up 0.6% as a weaker yen, which benefits export-oriented stocks, also provided support. The dollar was last up 0.3% against the yen.

Hong Kong's Hang Seng Index was up 1.5%, with tech heavyweight Tencent adding 2.5%. Shares of Chinese developer Sunac China surged 13.7% as trading resumed Tuesday, after the company unveiled plans to buy hotel and theme-park assets from Dalian Wanda for $9.3 billion.

In commodities, Brent crude oil was last down 0.7% at $46.57 a barrel, building on losses of around 17% in the past three months.

"Earnings are good right now--the question is are they going to be good in 2018, and energy will probably have a lot to do with overall earnings growth," said Doug Foreman, chief investment officer of Kayne Anderson Rudnick Investment Management.

While the energy sector represents just 6% of the S&P 500, there are many companies across the industrials and materials sectors that do business with the energy patch and whose earnings rely on a stabilization in the oil price, he said.

James Glynn,

Philip Waller

and Joanne Chiu contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

July 11, 2017 07:24 ET (11:24 GMT)

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