Anisha Sircar & Ambar Warrick

(Reuters). European shares fell to a record low for the week on Tuesday. The biggest loss was in tech stocks, as a spike of short-term U.S. Treasury Yields reflected an increase in expectations that the Federal Reserve would raise interest rates as soon as March.

The pan-European Index fell 1.0%, to 479.79 Points. As tech stocks resumed their losing streak which began at the beginning this year, they fell 2.2%.

For the first time in February 2020, the two-year Treasury yields (which track short-term interest rates in the United States) surpassed 1%. Future earnings of technology companies are discounted when lending rates rise.

In the first ten trading sessions of this year’s European Tech sector, closings were lower.

Stuart Cole, Equiti Capital’s head macroeconomist, stated, “With both the FOMC (Federal Open Market Committee), and BoE [Bank of England] already in tightening mode. It is easy to see that the ECB will also change tack and move policy towards fighting inflation, especially given the effects of soaring fuel prices, which are likely to continue rising higher.”

We had a positive start to the year but the early optimism has subsided and equity markets could have trouble the next few weeks as we approach the Federal Reserve meeting.

STOXX 600 was at record highs in January, but the trend has reversed as investors remained cautious due to hawkish central banking, geopolitical tensions (and soaring oil prices), and investor jitters.

After receiving hawkish signals by central bank officials, investors now await the Fed’s policy meeting next week.

It is expected that the fourth quarter earnings season will help to assess the effects of the Omicron Coronavirus variant, as well as supply chain issues on European earnings.

Petroleum stocks saw a 1.1% increase as oil prices rose to new highs following political turmoil in the Middle East. This fueled fears about a limited supply and led to oil stocks rising 1.1%. [O/R]

GAM Holding fell 16.7% among individual stocks after it said it anticipated a loss of roughly 30,000,000 francs in 2021 earnings.

French catering company Sodexo (PA) saw 1.7% growth after Reuters reported that Bain Capital had been looking for a stake to acquire a portion of its benefits and rewards unit.

Chocolate maker Lindt & Spruengli fell 3.0% after it said sales of its upmarket chocolates will likely grow at a slower pace in 2022 than last year, due to supply chain bottlenecks.