European shares slip on Fed hike bets, tech drag

European and Asian shares fell sharply on Tuesday, driven by concerns over interest rate hikes and increased corporate spending on AI, with the tech sector particularly affected.

European shares fell at ​the open on Tuesday, as expectations for ​imminent interest rate hikes by the Federal ‌Reserve ​and concerns around increased corporate spending on AI dented sentiment.

The pan-European STOXX 600 index fell 0.89% to 633.61 points by 0721 GMT, with most ‌sectors trading in negative territory. Globally, the tech sector had a strong run earlier this quarter as investors bet on the AI boom, with those in Europe performing the strongest among sectors. However, as borrowing costs tick higher, ‌corporates banking on debt-backed spending are likely to come under pressure.

Asian equities fell sharply, as tech-led ‌weakness and concerns over tighter U.S. monetary policy overshadowed easing Middle East supply worries. South Korea's Kospi index plunged nearly 10% at close. Traders are expecting the Fed to hike interest rates by a total of 50 basis points by the end of ⁠this year, ​according to the CME Group's ⁠FedWatch Tool, to combat inflation pressures stemming especially from higher energy costs.

Markets are also holding on to bets that the ⁠European Central Bank will lift borrowing costs by another 25 bps later this year, according to LSEG-compiled data, despite President Christine ​Lagarde downplaying the likelihood of second-round inflation effects on Monday. Basic resources led sectoral losses, falling ⁠3.3%, as miners Fresnillo and Hochschild fell more than 6% each, tracking declines in precious metal prices.

European tech stocks were down 2.6%, ⁠tracking weakness ​in Asia and among Wall Street megacaps late on Monday. Chipmaker Infineon and semiconductor equipment maker Aixtron slipped 3.8% and 4.8%, respectively.

Among movers in Europe, Signify plunged 15.6% after the world's largest lighting ⁠company updated its strategy to target an adjusted EBITA margin of around 10% by 2029. Heineken shares rose ⁠1.6% after the Dutch ⁠brewer appointed Rafael Oliveira as its new CEO, replacing Dolf van den Brink, who resigned from the company earlier this year amid an industry-wide slump in sales.