European shares slide 1% on hawkish Fed signals

European stocks sank more than 1% on Thursday as hawkish signals from the minutes of the U.S. Federal Reserve's December policy meeting crushed global investor sentiment and sparked a rout in technology stocks. The pan-European STOXX 600 index lost 1.1% and was set to erase most of its gains made in a rally that pushed it to record highs in the first three sessions of the year.

European stocks sank more than 1% on Thursday as hawkish signals from the minutes of the U.S. Federal Reserve's December policy meeting crushed global investor sentiment and sparked a rout in technology stocks.

The pan-European STOXX 600 index lost 1.1% and was set to erase most of its gains made in a rally that pushed it to record highs in the first three sessions of the year. On Wednesday, Fed minutes showed a tight job market and unrelenting inflation could require the U.S. central bank to raise interest rates sooner than expected and begin reducing its overall asset holdings.

Wall Street indexes fell sharply overnight, with the tech-heavy Nasdaq plunging more than 3%, as rising rates threaten eroding the value of future earnings in high-growth companies. All European sectors were in negative territory, with technology being the biggest loser, falling 2.6% to face its worst session in a month.

"There is the potential for more volatility at the start of the year, and the Fed minutes fed into that volatility, but it's not indicative of a sudden, negative shift in investor sentiment," said Craig Erlam, a senior market analyst at OANDA. "I think it's (the tech rout) an overreaction to the minutes. Even if that lasts a day, two days, three days, I don't think it's going to have a firm effect in the long term."

After European stocks hit new peaks at the start of the new year, a combination of possibly faster tapering cycle, COVID-19 restrictions and rising inflation is spooking investors ahead of the fourth-quarter earnings season. Trade in euro zone money markets suggested investors were positioning for a rate rise from the European Central Bank as early as October, and another in December.

Adding to worries, a French government spokesperson said a "supersonic" rise in COVID-19 infections was set to continue in the coming days and there were no signs of the trend reversing. In good news for manufacturers suffering from supply and labour issues, higher demand drove a bigger-than-expected rebound in German industrial orders in November, data showed.

Among stocks, Societe Generale's car leasing division ALD climbed 5% after agreeing to buy rival LeasePlan for 4.9 billion euros ($5.5 billion) to give it more scale as the rental market moves towards electric vehicles. Carrefour jumped 4.4% to the top of the STOXX 600, after a report of a fresh bid for the French retailer from rival Auchan.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)