European shares fall as strong U.S. data stokes rate hike jitters

© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, December 30, 2022. REUTERS/Staff/Files

By Ankika Biswas and Amruta Khandekar

(Reuters) - European shares fell on Monday, as fears that the global interest rate-hiking cycle could persist for longer than previously expected weighed on rate-sensitive technology and real estate shares.

The pan-European STOXX 600 closed down 0.8%, pulling back from a nine-month high it hit on Friday on optimism about the euro zone economy.

Nearly all sector indices were in the red, with rate-sensitive real-estate and technology stocks among those bearing the brunt of selling pressure and down about 2% each.

Retail stocks also fell 2.2%.

Stockholm-listed real estate firms Fabege, Fastighets AB Balder were the top percentage decliners on the STOXX 600, falling 8.7% and 7.2% respectively.

Concerns around elevated Sino-U.S. geopolitical tensions also weighed on sentiment, with China-exposed luxury goods makers Hermes International (OTC:HESAF), LVMH and Kering (EPA:PRTP) falling between 1.8% and 3.8%.

Shares of Prudential Plc, a financial services firm with exposure to China, were also a drag on the STOXX 600.

Data on Friday showing strong U.S. job growth and a rebound in services industry activity last month has rekindled fears of a prolonged period of high interest rates, two days after Federal Reserve Chair Jerome Powell acknowledged easing inflation as the U.S. central bank hiked rates by a quarter percentage point.

"Equity markets had got ahead of themselves with the softer (inflation) numbers we had started to see," said Stuart Cole, head macro economist at Equiti Capital in London.

"The strong U.S. data has dampened hopes that the Fed - specifically - but also the likes of the BoE (Bank of England) and ECB, are as near to ending their policy tightening as the markets had been hoping."

The European Central Bank struck a relatively more hawkish tone than its peers last week after it raised rates by 50 basis points and explicitly signalled another hike.

Germany's DAX index fell 0.8%. Industrial orders in Europe's largest economy beat forecasts in December.

Eurazeo (EPA:EURA) fell 2.0% after Reuters reported the French investment firm ousted its chief executive and named a new executive board following a row with the group's number one shareholder.

Meanwhile, Santander (BME:SAN) fell 1.5% as a Madrid court ruled that the bank's offer letter to Andrea Orcel making him chief executive was a binding contract.

Banco BPM, Italy's third-largest bank, gained 2.7% on plans to generate greater value longer-term from its retailers' payment business as it explores strategic options for the unit.