European shares experienced a slight dip on Thursday as technology stocks, sensitive to interest rates, slipped due to expectations of further rate hikes by major central banks. However, gains

in the banking sector helped limit the overall losses.

The pan-European STOXX 600 index edged 0.1% lower, with the technology sector down 1.2%, while European bank shares rose by 0.6%.

Stocks were weighed down by concerns that the U.S. Federal Reserve might adopt a hawkish stance in its upcoming meeting, and expectations that the European Central Bank will continue tightening its monetary policy. These fears emerged after the Bank of Canada raised its overnight rate to a 22-year high of 4.75% on Wednesday, with market participants and analysts predicting another increase next month.

Italy and Spain's lender-heavy indexes were among the early outperformers, rising about 0.4%.

Deutsche Bank strategists Jim Reid and Henry Allen noted that these recent developments contradict the prevailing narrative that central banks are nearing a pause in rate hikes, especially since Canada was one of the first to signal a pause in January. The analysts also questioned whether the Federal Reserve would follow with its own hike in the meeting next week or choose to keep rates on hold after ten consecutive increases.

In addition to these concerns, the Reserve Bank of Australia surprised markets by hiking rates in May and again this week after pausing its tightening cycle in April.

Market participants now see a 69% chance that the Federal Reserve will refrain from raising interest rates in its June meeting but will likely hike in July. Traders also expect a 97% chance of a 25 basis point rate hike by the European Central Bank next week.

Telecoms fell 1.1%, led by Vodafone, which dropped 4.5% after reaching a one-week high on Wednesday. Reuters reported that Vodafone and Hutchison are in the final stages of a merger agreement for their British operations.

Meanwhile, German biotech company Evotec jumped 7.6% and claimed the top spot in the STOXX 600 after Citigroup upgraded its rating on the stock to "buy" from "neutral," citing an attractive outlook.

Overall, European shares experienced a mixed session as rate concerns weighed on technology stocks while banks provided some support to limit the losses. Photo by User:Ben2, Wikimedia commons.