European markets react as U.S. sees rate induced sell-off

LONDON — European stocks advanced on Wednesday, looking to shrug off market nerves after a rate-induced sell-off in the U.S. in the previous session.

The pan-European Stoxx 600 climbed 0.8% in early trade, with retail stocks adding 1.2% to lead gains while oil and gas stocks dropped 0.8%.

Europe investors are closely watching movements in U.S. markets after the Nasdaq Composite dropped 2.83% to 14,546.68 on Tuesday to record its worst day since March. The S&P 500 shed 2.04% and the Dow Jones Industrial Average lost 569.38 points, or 1.63%.

Stocks across industries slid as the benchmark 10-year Treasury yield touched a high of 1.567%, a move that prompted tech stocks to lead the broader markets lower with Facebook, Microsoft and Alphabet losing more than 3%.

Rising bond yields hurt growth stocks, including tech stocks, because they lower the relative value of future earnings, and make the popular stocks appear overvalued.

Overnight, Asia-Pacific stocks fell in Wednesday trade following the tumble on Wall Street while U.S. stock futures inched higher in early premarket trade.

European market attention will be on central banks today with U.S. Federal Reserve Chairman Jerome Powell, European Central Bank President Christine Lagarde, Bank of Japan Governor Haruhiko Kuroda and the Bank of England’s Governor Andrew Bailey all speaking at the ECB Forum on Central Banking on Wednesday.

On Tuesday, U.S. traders followed testimony from Powell to the Senate Banking Committee during which the central bank chief said that inflation could persist longer-than-expected.

EU economic sentiment data is set to be released Wednesday morning.

Earnings were a key driver of individual share price movement in early trade, with German food company GEA Group and British clothing retailer Next climbing 4.2% and 3.4%, respectively, after positive results.

At the bottom of the Stoxx 600, Royal Mail fell 5.2%.

– CNBC’s Tanaya Macheel and Eustance Huang contributed reporting to this story.