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European shares end lower on tech losses as bond yields weigh

02/23/2021 | 12:07pm

(Reuters) - European shares ended lower on Tuesday as high sovereign bond yields pressured heavyweight sectors such as technology, while a batch of mixed corporate earnings cast doubt over the pace of a post-COVID-19 recovery.

The benchmark euro zone stock index was down 0.4%, with tech stocks leading declines for a second straight session as they retreated further from 20-year highs.

A recent spike in sovereign bond yields also weighed on stocks, as higher returns in fixed income offered investors a safer alternative to relatively riskier equities.

Technology stocks in particular have also been viewed as expensive by investors after their outperformance through the COVID-19 pandemic.

Still, bank stocks benefited from the rise in borrowing rates, with Spain's bank-heavy index adding 1.7%.

"Investors are cautiously optimistic about the rise in U.S. bond yields and what that tells us about inflation trajectories, while German shares seem to be weighing on the wider European market as tech stocks weaken further with the DAX being a tech-focussed index," said Michael Hewson, an analyst at CMC Markets.

Core European government bond yields rose despite indications of discomfort from European Central Bank President Christine Lagarde with the recent surge in yields.[GVD/EUR]

But U.S. yields retreated slightly after U.S. Federal Reserve Chair Jerome Powell downplayed concerns over inflationary pressures and reiterated continued monetary support.

European stocks have rallied sharply off pandemic-driven lows hit last year, but have been unable to reach pre-COVID highs on doubts over a euro zone economic recovery due to fresh lockdowns in major countries.

Among individual movers, HSBC Holdings dropped 0.8% after its annual profits fell sharply due to the pandemic, while it unveiled a revised strategy focused mainly on wealth management in Asia.

Swiss packaging firm SIG Combibloc Group bottomed out the STOXX 600 after its annual core earnings missed estimates.

German health care group Fresenius slipped after it narrowed its 2021 sales growth forecast and said it would launch a cost-cutting program, while cement-maker HeidelbergCement dropped 2.3% even after preliminary results showed core profit was up 6% last year.

French energy group Total gained more than 2% after it agreed to sell stakes in some wind and solar farms to Credit Agricole Assurances and Banque des Territoires.

(Reporting by Shashank Nayar in Bengaluru; editing by Uttaresh.V, Sriraj Kalluvila and Jonathan Oatis)

By Shashank Nayar and Ambar Warrick

© Reuters 2021
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