Tech, Auto Stocks Lead European Shares Lower

European shares fell as much as 2 percent on Friday, dragged down by auto and technology stocks, amid prospects of higher interest rates and geopolitical tensions in Ukraine.

The pan-European STOXX 600 was down 1.4 percent, paring some losses after falling as much as 2 percent earlier in the day, and on track for its fourth straight weekly decline.

Euro zone bond yields rose following the hawkish message that emerged from the U.S. Federal Reserve policy meeting earlier this week.

“There’s a whole lot to make investors nervous at the moment, and today seems to be the day European markets are really waking up to what the Fed’s increasingly hawkish stance will mean for all that cash sloshing around,” AJ Bell financial analyst Danni Hewson said.

Russia on Friday sent its strongest signal so far that it is willing to engage with U.S. security proposals and reiterated that it does not want war over Ukraine.

“As we’re approaching the weekend, a lot could happen in relation to the situation on the Ukrainian border and Russian troops,” David Madden, market analyst at Equiti Capital, said.

“The fear is that stock markets are closed for a 48-hour period, and what happens as tensions get ratcheted up in that timeframe is a huge deal.”

Technology stocks were the top decliners and fell 2.1 percent, tracking their worst month since 2008.

Adding to the gloom, euro zone economic sentiment deteriorated in January, pulled down by a more downbeat sentiment in the industry and services sectors.

Meanwhile, France posted its strongest growth in over five decades last year, hitting 7 percent, as the euro zone’s second-biggest economy bounced back from the COVID-19 crisis faster than expected, data showed.

However, the German economy, Europe’s largest, contracted more than expected in the fourth quarter of last year as pandemic-related restrictions hampered activity.

Auto stocks also led losses on the benchmark, with shares in Volvo falling 2.4 percent after the Swedish truck maker reported lower fourth-quarter core earnings and proposed a smaller-than-expected dividend.

Luxury goods maker LVMH rose 1percent after saying quarterly sales growth accelerated, while Signify NV, the world’s largest lighting maker, jumped 9.5 percent after reporting higher quarterly earnings.

Sweden’s H&M gained 2.4 percent after the fashion retailer posted a bigger profit rise than expected for the September-November period.

Home appliances maker Electrolux dropped 5.4 percent after saying global supply chain issues will linger and reported a drop in fourth-quarter profit.