Tech sell-off helps send European shares lower 

Apple shares were down over 2% at one stage. 

European stocks dropped the most in nearly a month as a renewed surge in bond yields hit investor sentiment, with technology shares among the biggest laggards.

The Stoxx Europe 600 Index closed 1.5% lower in its biggest decline since March 10. Travel and leisure and consumer stocks joined tech in posting the biggest daily retreat.

Comments by the US Federal Reserve governor Lael Brainard suggesting the central bank could trim its balance sheet faster than expected have rekindled fears of an economic downturn, fueling the sell-off in the bond market. In the US, the Nasdaq index fell sharply. Apple shares were down over 2% at one stage.   

Tech stocks come under particular pressure from higher interest rates as they mean a bigger discount for the present value of future profits for the so-called growth sectors.

“The market is now pricing in even more rate hikes and, with it, an even higher probability that the Fed is overreacting and will trigger a recession in 2023,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. 

“We think the Fed is clearly making a policy mistake by being too hawkish, but it is too early to become outright bearish on equity markets,” the strategist said.

With the war in Ukraine sending commodity prices surging in the first quarter, investors are also growing concerned about the hit from inflation to corporate profit margins heading into the earnings season. 

Sanford C. Bernstein strategists including Sarah McCarthy warned the consensus outlook for European companies’ margins this year was too bullish amid the economic slowdown and higher input costs.

For Patrick Moonen, a strategist at NN Investment Partners, the geopolitical risks and their impact on commodity prices means the risk/return trade-off is deteriorating. 

"In Europe, the French elections and the narrowing lead of Macron in the polls add another layer of uncertainty,” he said. The Cac-40 underperformed other benchmarks again on Wednesday. 

Bloomberg