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…