Global Market: European shares fall as global tech selloff, rate fears weigh on sentiment

The pan-European STOXX 600 index declined 0.35% to 635.54 points by 0709 GMT, with technology stocks leading the losses as investors reassessed the outlook for interest rates following stronger-than-expected US inflation data.

According to Reuters, technology shares from New York to Seoul came under pressure on Wednesday and Thursday after the latest US inflation figures heightened concerns that the Federal Reserve could raise interest rates further. The prospect of higher borrowing costs has weighed particularly on companies requiring substantial debt financing to fund their artificial intelligence infrastructure investments.

The technology sector fell 3.2%, highlighting its vulnerability to shifts in investor sentiment surrounding artificial intelligence and the financing requirements of companies investing heavily in the technology.

Deutsche Bank noted that companies with significant exposure to artificial intelligence had already faced mounting pressure in recent days. The pressure had also spread to businesses facing increased scrutiny from credit investors because of their substantial capital expenditure requirements, Reuters reported.

Despite the broader market weakness, some corporate earnings announcements helped limit losses.

Ericsson shares surged 9.9% after the telecommunications equipment maker reported a smaller-than-expected decline in third-quarter core profit. The company benefited from efficiency measures that helped offset higher component costs, Reuters reported.

Pernod Ricard gained 3.2% after the spirits maker reported a smaller-than-anticipated 0.9% decline in sales for the first quarter of its 2027 financial year.

Investors are closely monitoring corporate earnings and economic data for clues about the outlook for borrowing costs, particularly as higher interest rates could weigh on valuations and increase financing expenses for companies investing heavily in artificial intelligence.

The latest selloff underscores the sensitivity of technology shares to changes in interest-rate expectations, even as stronger-than-expected corporate results provide pockets of support across European markets.