European shares dropped on Thursday, taking their lead from Wall Street as investors sold off tech stocks that had driven a Wall Street rally in recent months and fretted about the threat of inflation.
The Stoxx 600 index closed 0.4 per cent lower, while the Iseq index in Dublin dropped almost 1 per cent to 7,441.71.
AIB rose 2.2 per cent to €1.90 as a climb in bond yields internationally, fuelled by inflation concerns, fanned hopes that interest rates may rise sooner than expected. This would boost incomes in the banking sector.
However, housebuilders were out of sorts ahead of Glenveagh Property’s annual results on Friday, as most of the construction industry remains in lockdown. Glenveagh fell 1.8 per cent to 82.3 cent, while Cairn Homes declined by 1.7 per cent to 93.6 cent.
London’s FTSE 100 shed early gains to end slightly lower, as losses in defensive sectors due to higher treasury yields outweighed gains in resource and most banking stocks.
After rising by as much as 0.7 per cent, the blue chip FTSE 100 index fell 0.1 per cent, with defensive sectors, such as consumer staples, healthcare and utilities at the forefront of losses.
But Standard Chartered was the worst performer on the FTSE 100, tumbling 6.2 per cent after the impact of the Covid-19 pandemic more than halved its annual profit.
Mining stocks, including Rio Tinto, Anglo American, and BHP were the biggest boosts to the FTSE 100, with oil heavyweights BP and Royal Dutch Shell also providing support on strong crude and metal prices.
“I think investors are a little uneasy with what we’re seeing in the bond markets in terms of rising yields and the pace at which they’re rising,” said Craig Erlam, senior market analyst at Oanda.
Aston Martin gained 6.8 per cent after the luxury carmaker said it expects to almost double sales and move back towards profitability this year.
Sectors such as healthcare, utilities and other staples, which are considered bond proxies, fell on the day amid continued pressure from higher yields.
But commodity-linked sectors were among the best performers, boosted by multi-year highs in crude oil and base metal prices.
Weakness in US markets due to profit taking in technology stocks also spilled over into Europe late in the session.
Anheuser-Busch InBev, the world’s largest brewer, tumbled 6.2 per cent even as it reported a higher-than-expected core quarterly profit, while chemicals and pharma group Bayer dropped 6.4 per cent after posting a drop in fourth-quarter core earnings due to competition in the North American agriculture market.
Shares of heavily shorted airline Air France KLM rose nearly 2 per cent, with traders saying a short squeeze was driving gains.
Wall Street’s main indices were lower in early afternoon trading, with the Nasdaq slipping about 2.5 per cent, as technology-related stocks remained under pressure following a rise in US bond yields.
The benchmark 10-year Treasury yields hit a one-year high of 1.48 per cent, prompting investors to lock in profits on some high-flying growth stocks due to concerns over heightened valuations.
Meanwhile, data showed fewer Americans filed new claims for unemployment benefits last week amid falling Covid-19 infections, but the near-term outlook still remained unclear after winter storms wreaked havoc in the South region in the middle of this month.
Tesla fell after a media report that the electric-car maker told workers it would temporarily halt some production at its car assembly plant in California.
Best Buy slid on a weak full-year forecast after missing estimates for holiday-quarter comparable sales.
Moderna jumped after the drugmaker said it was expecting to post $18.4 billion in sales from its Covid-19 vaccine this year. – Additional reporting: Reuters, Bloomberg