European tech stocks rise after Alphabet tops expectations

European stocks rose on Wednesday as traders shrugged off worries about impending US interest rate rises to focus on a batch of strong tech company earnings.

The regional Stoxx 600 gained 0.6 per cent in early dealings, with its tech sub-index adding 1 per cent. Futures markets implied the tech-heavy US Nasdaq 100 index would open 1.2 per cent higher.

The moves came after Google parent Alphabet followed Microsoft and Apple to issue quarterly results that beat analysts’ expectations.

Shares in many tech businesses, which were the clear winners of the pandemic era, have slid this year, dragging the Wall Street bourses they dominate and many global markets down with them.

This came as the US Federal Reserve opened the door to a series of rate rises and discussed shrinking its $9tn balance sheet, reversing two years of easy monetary policy and depressing the most highly valued and speculative areas of global stock markets.

Alphabet’s US shares rose by about a tenth in pre-market trading on Wednesday. Its German-listed shares rose 9 per cent. German-listed shares in Facebook owner Meta, which is yet to release its quarterly update, gained just under 4 per cent.

“These results from higher quality tech businesses are helping to distract attention from central banks and the normalisation of monetary policy that markets are facing in 2022,” said Aneeka Gupta, research director at ETF provider WisdomTree.

“But I don’t think this market correction is over,” she said, following Wall Street’s worst January since the 2009 financial crisis. “This is a time when economic growth is coming off very high levels reached in 2021, inflation is going to bite into companies’ profit margins and they will struggle with high operating costs and higher interest rates.”

The IMF has significantly downgraded its 2022 growth forecasts for China and the US. Markets have also priced about five quarter-point rises in the fed funds rate by the end of the year, from close to zero at present.

One of the central bank’s officials, Atlanta Fed president Raphael Bostic, floated the idea of a supersized half-point increase in March.

In debt markets, the yield on the benchmark 10-year US Treasury note fell about 0.02 percentage points to 1.78 per cent. This benchmark yield, which moves inversely to the price of the government debt instrument and sets the tone for borrowing costs worldwide, has climbed from about 1.5 per cent at the end of last year as the prospect of sustained inflation and higher interest rates made fixed-income securities less appealing.

Germany’s equivalent Bund yield, which before a move higher last month had traded below zero since May 2019, dipped 0.02 percentage points to 0.01 per cent.

The dollar index, which measures the greenback against six major currencies, dipped 0.1 per cent lower on Wednesday as risk appetite for equities weakened demand for the haven asset.

Brent crude, the oil benchmark, added 0.2 per cent to $89.32 a barrel.