By Kit Rees
LONDON (Reuters) - European shares declined on Wednesday in early deals as worries over rising bond yields trumped a slew of well-received earnings updates from Kering (PA:PRTP) and Credit Suisse (SIX:CSGN), while Shire slipped after accepting an improved offer from Takeda.
The pan-European STOXX 600 index was down 0.9 percent at 0907 GMT, pulling further away from its highest level since the beginning of February, while Germany's DAX fell 1.7 percent.
Concerns over higher bond yields continued after the yield on the U.S. 10-year Treasury breached the psychologically significant 3 percent level on Tuesday, raising questions over the relative attractiveness of equities and sectors which pay steady dividends.
Ken Odeluga, market analyst at City Index, also pointed to outlook comments from big U.S. companies such as Caterpillar which suggested that the progression in earnings and rates of growth had peaked.
This, combined with a recent slowing in economic indicators for Europe, was contributing to the downbeat market sentiment.
"There's a bit of a malaise brewing here. I think that the earnings season will play a large part. If we get some solid earnings from major companies, that can actually do quite a bit to remove that," City Index's Odeluga said.
On the day, almost every European sector was in negative territory, with shares in cyclical sectors such as industrials, financials and commodities stocks the biggest fallers.
Even some upbeat earnings reports failed to boost sentiment. Shares in Kering were the biggest STOXX gainers, up 6.3 percent after the luxury goods company posted an impressive performance in its first quarter results thanks to flying demand for its Gucci clothing and handbags.
Credit Suisse stood out among banks, its shares jumping 3.7 percent after beating first-quarter profit expectations as a revamp at the bank bore fruit.
While concerns around semiconductor stocks, in particular those in the Apple (NASDAQ:AAPL) supply chain, have weighed on chipmakers this week, STMicroelectronics saw its shares rise 3.7 percent after an upbeat assessment on second-half demand for its smartphones-focused products.
In M&A news, shares in Shire reversed early gains to trade 1.5 percent lower after saying it would recommend Takeda's sweetened $64 billion bid offer to shareholders.
Analysts at Jefferies questioned whether Shire shareholders would be willing to accept an offer which they say is effectively 44 percent cash and 56 percent equity.
"While this offer represents a solid improvement over Takeda’s third bid (38 percent cash), we still wonder if it is enough to satisfy (Shire) shareholders, who would still bear some not insignificant risk going forward as (around) 50 percent owners (in the new company)," Jefferies analysts said in a note.
But a number of companies saw their shares punished. Osram Licht dropped 10.6 percent after cutting its guidance, while Atlas Copco fell 7.2 after reporting results.