European shares fall, Italy shares fall on political fears

European shares fell on Thursday, affected by increased expectations that the Federal Reserve will raise interest rates again after a sharp rise in the inflation rate in the United States, while the main index in Italy fell 1% as the risk of a government collapse increased.

The pan-European Stoxx 600 index was down 0.3 percent by 0711 GMT. The index fell 1 percent on Wednesday after higher-than-expected inflation data in the United States raised expectations that the Federal Reserve could raise interest rates by more than 75 basis points, which the market had been expecting at the end of this month.

This heightened investor fears of an economic recession as well as increased pressure on the European Central Bank with the euro dropping below its parity point against the dollar on Wednesday.

Italy’s MIB index fell after the Five Star Movement said it would not participate in a vote of confidence in parliament later on Thursday, in a move likely to lead to the collapse of Prime Minister Mario Draghi’s government.

Italian bond yields rose sharply and the yield spread with their German counterparts widened.

On the other hand, Sweden’s SEB Bank, German fashion house Hugo Boss and Norwegian oil services company Aker were among the top gainers on the pan-European Stoxx 600 index after positive earnings updates.

Shares in Swedish telecom equipment maker Ericsson fell 7.7 percent after it failed to meet its core earnings forecast.