On Thursday, European stocks ended lower after giving up gains they had recorded earlier in the day, with the highest declines recorded in technology and energy shares.
This was because risk sentiment took a beating over concerns about geopolitical disruptions and tighter monetary policy.
There was a 0.7% drop in the pan-European STOXX 600 index for the day, which saw it record losses for the third consecutive session.
Energy shares dropped by almost 2.1% because of slumping crude prices over concerns about demand. A 1.8% fall in technology shares were also seen, which weighed the heaviest on the STOXX 600 index.
This is because tech stocks tend to perform poorly in a high interest rate environment, as their future earnings are usually under pressure.
The possibility of a hawkish US Federal Reserve has been strengthened due to a series of economic data released this week.
Next week, it is expected that the US central bank will deliver its third consecutive interest rate hike of 75 basis points.
The European Central Bank (ECB) had also increased its interest rate last week by a similar number and signaled that there would be more increases to come.
Market analysts said that there was a great deal of volatility in the equities market because every data point results in a battle between the bears and the bulls.
They said that there was a broad sell-off in the market primarily because strong consumer price, job market and sales data indicates that Fed has to push rates even higher.
Similarly, geopolitics is also keeping the markets quite volatile. Since Russia has been sanctioned by Western nations due to its conflict with Ukraine, China has decided to come to its aid.
On Thursday, China stated that it would cooperate with Moscow for providing positive energy and stability.
The war has resulted in worries in Europe over an energy crisis that has left leaders scrambling to introduce measures for supporting people as well as companies.
There was a 1.7% rise in European banking stocks due to the possibility of rising interest rates. The banking sector got an upgrade from Morgan Stanley to ‘overweight’, which means earnings will be strong and valuations cheap.
There was a more than 4% rise in Spanish banking stocks, such as Caixabank, Sabadell and Bankinter.
This was after reports that Madrid could make modifications to a bank tax because it does not want to be in a conflict with the European Central Bank (ECB).
There was a 4.7% decline in H&M shares after quarterly sales of the retailer turned out to be lower than expected.
This was due to the fact that shoppers had chosen to tighten their belts amidst increasing food bills and surging energy costs.
Moreover, the retailer was also struggling with the competition it is getting from its rival company, Zara which has enjoyed a great deal of popularity of late thereby leading to further problems.
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