European shares head for first monthly loss in six as higher bond yields weigh

By Sudeshna Ghoshal

Sept 30 (Reuters) - European shares looked set to log their first monthly decline in six on Wednesday, as a surge in global bond yields reduced the appeal of risk assets.

The pan-European STOXX 600 .STOXX was up 0.4% at 640.36 points by 0844 GMT. It is down 1.7% for the month and nearly flat for the third quarter.

An energy-price shock from the Iran war, deteriorating government finances and a glut of issuances prompted major central banks, including the Federal Reserve and the European Central Bank, to raise interest rates or adopt a more hawkish stance this month.

"Everything got off on the wrong foot with Jackson Hole (in late August)... (Fed chief) Kevin Warsh was more hawkish than we expected and put us on a path of a rate hike, and that just set the tone for the entire month," said Chris Beauchamp, chief market analyst at IG Group.

Oil was up nearly 14% for the month and set for the biggest climb since July, as US-Iran talks aimed at ending their war stalled. O/R

Energy shares .SXEP shed roughly 1%, but were on track to end the month with a 3.7% gain.

The 10-year German bund yield , a euro zone benchmark, eased for a second day but hovered around its 2009 high.

How bond yields fare and whether their recent surge will continue will remain a key focus for investors, IG Group's Beauchamp added.

Britain's economy grew faster than previously thought in the second quarter, data showed on Wednesday, while France's inflation reading for September came in higher than expected.

Attention now turns to Germany's preliminary September inflation data due later in the day, which could provide fresh insight into the euro zone's largest economy and the broader inflation outlook.

On the STOXX 600, utilities .SX6P led sectoral gains, lifted by advances in Pennon Group PNN.L and National Grid NG.L.

Among individual movers, Nordnet SAVE.ST shares gained 2.5% as J.P. Morgan resumed coverage on the stock with an "overweight" rating.

Britain's largest fast-food chain Greggs GRG.L gained 6.3% after the company raised its annual profit outlook.