Tech selloff drags down European shares, US inflation data awaited

By Khushi Singh and Amruta Khandekar

(Reuters) -European shares were hurt by a steep selloff in the technology sector on Monday, while investors turned wary ahead of a key U.S. inflation report later this week that will shape expectations for interest rate cuts.

The pan-European STOXX 600 ended 0.4% lower, coming off an all-time high hit in the prior session.

The technology sector was the biggest drag on the STOXX 600, pulled 2% lower by a 8.9% decline in shares of BE Semiconductor.

The chipmaking parts supplier tumbled to the bottom of STOXX 600 on worries over potential delays in hybrid bonding adoption.

Heavyweight chipmaker ASML also shed 4.2%.

Market focus has now shifted to Tuesday’s U.S. February inflation data for fresh cues on the timing of interest rate cuts, after a report on Friday showed job growth in the world’s largest economy accelerated last month.

“The strong U.S. jobs report on Friday added to the feeling that the inflation number tomorrow is going to be a little bit hot and that’s another reason why European assets sort of backed off a little,” said Ben Laidler, global markets strategist at eToro.

Pressuring equities, Germany’s 10-year bond yield, considered the benchmark for the euro zone, edged up on Monday after suffering its biggest weekly fall since December last week. [GVD/EUR]

Europe’s industrials sector was also among top losers, while the mining index slipped 0.4%.

“Resources are some of the most sensitive assets to the dollar and bond yields and we’re seeing a bit of natural profit taking ahead of U.S. inflation data,” Laidler added.

Investors will also watch out for figures on euro zone January industrial production due later in the week.

Market participants expect both the U.S. Federal Reserve and European Central Bank to start the monetary policy easing cycle from June, and softer economic readings could further boost that sentiment.

In corporate updates, LEG Immobilien’s shares rose 5.1% after the German real estate firm reported a full-year results beat and said it would propose a higher-than-expected dividend.

Shares of Telecom Italia shed 4.6% after publication of details of the cashflow and debt level of the venture created by the planned sale of its fixed line network failed to convince investors, who also sold off heavily last week.

Shares in Italian regional utility A2A dropped 3.6% upon the signing of a $1.3 billion deal agreement to buy some electricity distribution networks from Enel.

Meanwhile, Portugal’s PSI index ended up 0.1% after the centre-right Democratic Alliance won Portugal’s general election, though well short of a governing majority.

(Reporting by Khushi Singh and Amruta Khandekar in Bengaluru; Editing by Sherry Jacob-Phillips and Shinjini Ganguli)