By Sruthi Shankar

(Reuters). European stocks plunged Thursday after the release of U.S. inflation figures, which raised fears about the effects of rising interest rates upon economic growth.

This index, which covers the entire continent, fell 0.8%. It reversed many of its gains over midweek. Top losers were amongst the sectors technology, automakers and mining stock.

Investors bet on higher Federal Reserve rate increases after consumers prices declined in April, but they were still much higher than forecasted by economists.

Mark Haefele from UBS Global Wealth Management, said that inflation data would remain an important concern for investors and policy makers over the next few months.

“Rapid wage growth combined with strong demand may lead to sustained price rises for services. The Fed will continue increasing rates, even if prices stabilise,”

Concerns over tightening of monetary policy and a Chinese economic slowdown have increased fears about recession. This has caused the STOXX 600 index to drop 6.7% since May, even though earnings for the first quarter were largely encouraging.

Worries were further heightened by the fact that Russian gas flow to Europe via Ukraine dropped 25% after Kyiv stopped using a major transit route. This is the first disruption to exports through Ukraine since the invasion.

“Europe faces current negative supply shocks. This situation has only worsened after Russia’s invasion of Ukraine.” Morgan Stanley In a client note, analysts from (NYSE:) wrote about the situation.

“The increase in energy prices is more severe than we expected. It has led to a decline in the profit margins of households and businesses, and ultimately, a negative impact on investment and consumption.”

The volatility index for euro-zone stocks rose above 33 points.

Siemens dropped 2.5% after it announced that it would quit Russia’s market in response to the war with Ukraine. It also took a 600 million euro ($630.18million) loss to its business during quarter two.

STMicroelectronics, an Italian chipmaker from Franco and Italy, saw its share rise to 4.0% as the company forecasts more than $20 billion annually by 2027.

Britain’s leading broadband operator BT gained 1.0% when it said it had concluded a deal to combine its sports-broadcasting unit and Discovery (NASDAQ) Inc. This was in line with expectations for core earnings.

According to Refinitiv data analysts now anticipate that profit at STOXX 600 businesses will grow by 42.4%. This is an increase of 20.8% from the beginning earnings season. Nearly half of European companies reported their results so far.