European stocks fell at the open on Thursday as the EU vowed legal response after the British government unilaterally extended a grace period for checks on food imports to Northern Ireland.

The FTSE 100 (^FTSE) fell 0.49% after the bell, while the CAC (^FCHI) tumbled 0.20% and the DAX (^GDAXI) was 0.37% lower.

The UK government extended a grace period for some checks on agricultural and food products imported by retailers to Northern Ireland until 1 October in a bid to ensure the free flow of goods to the British region.

However, Brussels said the move violated terms of Britain's divorce deal.

"This is the second time that the UK government is set to breach international law," the European Union said in a statement.

Since the UK left the bloc, both sides have accused the other of acting in bad faith in relation to part of their Brexit agreement that covers goods movements to Northern Ireland.

Across the pond, S&P 500 futures (ES=F) were flat, at 0.01% higher, Dow futures (YM=F) rose 0.04%, and Nasdaq futures (NQ=F) were 0.18% higher as trade began in Europe.

It comes after a fall on Wall Street on Wednesday. Traders are concerned that higher inflation may prompt central banks to raise ultra-low interest rates.

Investors are also anticipating that policies outlined during the annual session of the National People's Congress, a largely ceremonial legislature that convenes on Friday, may point to a tightening of monetary and government stimulus.

Asian shares fell overnight, following a fall in US stock markets, as another rise in bond yields rattled investors.

Japan's Nikkei 225 (^N225) lost 2.13% while the Hang Seng (^HSI) in Hong Kong dropped 2.12%.The Shanghai Composite index (000001.SS) shed 2.05%.

South Korea's Kospi (^KS11) lost 1.28% after the central bank reported the economy contracted in 2020 for the first time since 1998.

"Rising bond yields – an issue that briefly went away at the start of the week after their February-ending surge – helped send the Dow a further 120 points lower last night, forcing it back under 31,300," Connor Campbell of SpreadEx said. "The impact was even more severe in Asia."

"Last night saw the bench 10-year US Treasury bond yields hit 1.477% – still a way off last week’s 1.614%, one-year high, but going in the wrong direction from a market perspective."

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