European stocks drop after overnight Wall Street sell-off

European shares dropped on Friday following a sell-off on Wall Street, with shares in technology companies under renewed pressure after streaming giant Netflix warned on subscriber growth late on Thursday.

The regional Stoxx 600 equity gauge fell 1.3 per cent in opening dealings, while London’s FTSE 100 slid 1.2 per cent. In Asia, Hong Kong’s Hang Seng fell 0.1 per cent and Japan’s Nikkei 225 declined 0.9 per cent.

Technology stocks were among the worst performers on Friday on the Stoxx 600, with the index tracking the sector off 2 per cent.

Those moves came after swings in US stock markets on Thursday culminated in the tech-heavy Nasdaq Composite index closing 1.3 per cent lower — down almost 13 per cent from a record high struck only in November.

The broader-based S&P 500 index also closed more than 1 per cent lower on Thursday. Futures markets tracking the blue-chip gauge and the top 100 stocks listed on the Nasdaq were both down in the early European morning on Friday.

Netflix’s shares dropped about a fifth in after-hours trading on Thursday after the streaming service warned that subscriber growth would slow substantially in the first quarter. With a market value of $225bn, the group is a heavyweight on major US stock indices.

US equities have struggled in January in line with expectations that the US Federal Reserve will have to lift interest rates faster than initially believed to contain soaring consumer and wholesale prices.

On top of raising borrowing costs for companies, higher rates can also erode the current value of highly-valued tech companies’ future cash flows, rendering them less attractive as investments.

In government debt markets, the yield on the benchmark 10-year US Treasury note lost 0.05 percentage points on Friday to 1.78 per cent — extending a price rally from the prior session.

The yield on the two-year note fell 0.03 percentage points to 1.02 per cent — having topped 1 per cent earlier in the week for the first time in almost two years.

Brent crude, the international oil benchmark, fell more than 1 per cent on Friday to $87.36 but still remained close to its seven-year high touched on Tuesday. The dollar index, which measures the currency against six others, slid 0.1 per cent.

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