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Technology companies led European stocks lower on Wednesday on persistent concerns over a regulatory crackdown and falls in major tech stocks overnight.
The pan-regional STOXX 600 benchmark index was down 1.1 per cent by 0909 GMT, with tech leading the fallers, down 2.5 per cent, after shares in Facebook fell further on continued privacy concerns.
A further fall in bond yields also put pressure on the heavyweight banking sector. Shares in electric car maker Tesla fell on Tuesday after a fatal crash and fire prompted a US federal field investigation, while Twitter tumbled after short-seller Citron Research called it “most vulnerable” to privacy rules.
Meanwhile, chipmaker Nvidia Corp suspended self-driving car tests, a week after an Uber autonomous vehicle struck and killed a woman in Arizona. Tech was a key driver behind a rally to record highs in global equity markets and investors are concerned that an increase in regulation could spark a further sell-off.
“A recent stream of negative news has acted as a trigger for the sell-off in the US tech sector. But the underlying cause... is extremely stretched valuation metrics that have generated a sizeable misalignment with fundamentals, mostly for the big technology stocks,” said UniCredit in a note.
On a price to earnings basis, European and US technology stocks are valued around their highest level in more than a decade.
European tech stocks have fallen 9.5 per cent from their end-2017 peak but remain among the best sectoral performers in the region over the last year, up 2.5 per cent. Top fallers among European tech stocks were chipmakers ams, STMicro and Infineon.
“As concerns semiconductors, the fear comes from the environment of bad news that is accumulating around the functioning and testing of autonomous vehicles,” IG analyst Alexandre Baradez said.
Among banks, big fallers included Commerzbank, UBS and Credit Suisse , which all declined by more than 1 per cent, after German bond yields fell below 0.5 percent for the first time since early January. The fall in bond yields helped defensive stocks like utilities with steady dividends outperform.
Europe’s utilities index was the only sector in positive territory, up 0.2 per cent, led by a 3.1 per cent jump in Britain's United Utilities, which was underpinned by an upgrade to hold from sell by CFRA.
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