By Anisha Sircar

(Reuters) – European shares dropped on Friday due to auto stocks, a general fear-off tone and geopolitical tensions in Ukraine as well as the prospect of higher interest rates.

The pan-European was down 1.0% last week and on pace for its fourth weekly drop.

The yields on Eurozone bonds rose after markets digested the Fed’s message earlier in the week that was more hawkish than anticipated.

Investor sentiment is also being affected by geopolitical uncertainty around the Russia-Ukraine conflict. The index may be in its worst month since Oct 2020.

Mark Haefele (Chair Investment Officer, UBS Global Wealth Management) stated that market volatility has reached its highest point in over a year because of uncertainty about the U.S. Federal Reserve’s ability to steer us towards a soft landing.

“However, underlying economic growth will likely stay strong in the first-half… This favors cyclical businesses and value stocks…We think Eurozone equities which provide undemanding valuations will be the primary beneficiaries.”

The tech stocks fell to their lowest point in almost a year and are now tracking their worst month since 2008. This is because market expectations of four to five rate increases this year will hurt the growth stock rally.

France experienced its highest growth for over 50 years, reaching 7% last year. The second-largest economy in the Euro zone bounced back quicker than anticipated from the COVID-19 Crisis, according to data.

The largest economy in Europe, however, fell more than predicted during the fourth quarter, as COVID-19 restrictions restricted activity.

Auto stocks led losses on the benchmark, with shares in Volvo falling 3.5% after the Swedish truck maker reported lower fourth-quarter core earnings and proposed a smaller-than-expected dividend.

Retail stocks was the only sector that traded in positive territory, led by Sweden’s H&M. After posting an unexpectedly large profit growth for September-November, the fashion retailer saw a 5.2% increase in sales.

The luxury goods manufacturer LVMH saw its sales grow 1.4% in the fourth quarter. Signify NV was the largest light maker worldwide, rising 14.6% following higher quarterly earnings.

Sweden’s Electrolux plunged 4.7% following a statement that supply chain issues in the global world would continue to linger. The announcement came after Electrolux reported a decline of profits for its fourth quarter.

Spain’s most important domestic lender Caixabank fell 2.3% following a drop of 52% in net recurring profits in the fourth-quarter.