European equity markets declined on Tuesday, with the pan-European STOXX 600 index dropping 0.6 percent to 646.1 points by 0814 GMT. Germany's DAX fell 0.6 percent, London's FTSE decreased 0.4 percent and France's CAC 40 lost 0.5 percent, following a muted session Monday during a U.S. public holiday.
Novartis AG shares plunged 10.2 percent, the worst performer on the STOXX 600, after the company announced that a late-stage trial for del-desiran, a treatment for myotonic dystrophy, failed to meet its primary endpoint. This marks the third clinical setback for the Swiss pharmaceutical company in a single week. The del-desiran failure immediately followed Monday's disclosure that pelacarsen, an experimental cholesterol therapy, did not succeed in its late-stage study.
Fiona Cincotta, senior market analyst at Stone-X, said the company "had a solid year to date before this latest pullback yesterday and today. We've had solid gains."
Rising oil prices weighed on broader sentiment. Brent crude futures traded around $98.50 per barrel, driven higher by threats from Iran of retaliation against any new attacks. Iran stated it would target energy infrastructure across the Gulf, including U.S. oil and gas interests. Energy equities rose 0.6 percent, the only major sector in green.
Higher crude prices revived inflation concerns that triggered a global bond selloff last week, strengthening expectations that central banks will maintain restrictive monetary policies. Market participants broadly anticipate the European Central Bank will raise interest rates by 25 basis points on Thursday. The Federal Reserve is also expected to increase rates this month, supported by stronger-than-expected U.S. labor data released last week. Upcoming U.S. inflation figures scheduled for later this week will influence near-term expectations.
Bank stocks retreated 1.3 percent across Europe. Cincotta linked the weakness in financials to a deteriorating growth outlook for the euro area. She said: "This is to do with the broad outlook for the eurozone economy and impact of higher oil prices. Are we looking towards a more recessionary outlook for the eurozone, which banks tend to be the first place where we see that reflected."
In other corporate news, Sandoz shares gained 4.5 percent after the Swiss pharmaceutical company announced plans to more than double net sales between 2025 and 2035. In Italy, Poste Italiane increased its takeover proposal for Telecom Italia, as the state-controlled group seeks control of the former national telecom monopoly.
