European shares slip as banks drag, oil-driven inflation fears weigh

European shares inched lower on Tuesday, weighed down by losses in heavyweight banks, as surging oil prices and rising global bond yields dented risk appetite ahead of the U.S. Federal Reserve's monetary policy decision later this week. The pan-European STOXX 600 was down 0.4% at 633.3 points, as of 0707 GMT, with most major regional bourses also trading lower. Banks were among the biggest drags, down 1.3%, with most main sectors on the STOXX 600 lower, barring healthcare and travel and leisure. Oil-driven inflation worries stemming from escalating tensions in the Middle East showed no signs of abating, reinforcing expectations that central banks worldwide could raise interest rates this year. The yield on the benchmark U.S. 10-year Treasury hit the key psychological level of 5% for the first time since October 2023 on Monday. Traders are increasingly betting on a 25-basis-point Fed rate hike, following the European Central Bank's second rate increase last week. Among stocks, Deutz slipped 4.5% after the firm offered up to 10% of its shares in a capital increase.