By Shashank Nayar
(Reuters) - European shares reversed early gains to trade lower on Tuesday as mixed corporate earnings updates overshadowed a boost from strong commodity prices, while British bank HSBC fell after abandoning its long-term profitability targets.
HSBC Holdings (NYSE:HSBC) dropped 1.5% after its annual profits fell sharply due to the COVID-19 pandemic, while it unveiled a revised strategy focused mainly on wealth management in Asia.
The benchmark euro zone stock index was down 0.8%. Tech and healthcare stocks fell the most, while oil and gas and travel shares gained nearly 1%.
"Investors are cautiously optimistic about the rise in U.S. bond yields and what that tells us about inflation trajectories, while German shares seem to be weighing on the wider European market as tech stocks weaken further with the DAX being a tech-focussed index," said Michael Hewson, an analyst at CMC Markets.
Investors are tracking U.S. Federal Reserve Chair Jerome Powell's testimony to the senate committee later in the day for clues on the central bank's thinking to a recent rise in yields.
Meanwhile, core European government bond yields resumed their upward trajectory, even after the European Central Bank President Christine Lagarde on Monday signalled discomfort with the recent surge in yields.
European stocks have rallied sharply off pandemic-driven lows hit last year. But unlike their peers across the Atlantic, they have yet to reach pre-pandemic levels amid concerns over a stalling economic recovery and slow vaccine rollout.
UK's FTSE 100 index traded flat at 0905 GMT, while the mid-cap index jumped 1%, led by gains in travel stocks as the country looks to ease its lockdown restrictions in a phased manner.
Holiday Inn-owner InterContinental Hotels gained 3% after it said a faster recovery in its Holiday Inn Express brand had helped it outperform in key markets, even as it booked an annual loss of $153 million.
In other earnings news, German healthcare group Fresenius slipped after it narrowed down its 2021 sales growth forecast and said it would launch a cost-cutting program, while cement-maker HeidelbergCement (DE:HEIG) dropped 2.3% even after preliminary results showed core profit was up 6% last year.
Germany's benchmark index traded 1.0% lower with Heidelberg being the second biggest loser on the index.
French energy group Total gained nearly 2% after it agreed to sell off stakes in some wind and solar farms to Credit Agricole (OTC:CRARY) Assurances and Banque des Territoires.