PARIS: Europe’s benchmark stock index dropped on Wednesday as financials sagged on disappointing earnings from Swedish lender Handelsbanken, while technology stocks limited losses after ASM International’s strong forecast.

The pan-continent STOXX 600 index closed 0.5% lower after initially rising to its highest in over a week.

Bank shares lost 1.2% after Handelsbanken tumbled 12.1% following a first-quarter net profit miss, while SEB shed 3.7% after posting weaker-than-expected interest income in the first quarter.

Financials led sectoral declines, down 2%, with Allfunds losing 11% after a report that the fund manager abandoned talks over a potential sale.

UBS fell 2.9% after the bank’s executives flagged major concerns about the Swiss government’s plan to hit it with tougher capital requirements.

Tech stocks rose 1.3% after ASM International jumped 11% as the wafer-processing equipment supplier raised its second-quarter revenue forecast.

Of the 34 STOXX 600 companies that have reported first-quarter earnings, 61.8% exceeded estimates, compared with a long-term average of 54%, LSEG data on Tuesday showed.

Sentiment soured after Bundesbank President Joachim Nagel noted euro zone inflation could remain stubborn, so a possible interest rate cut by the European Central Bank might not be followed by further policy easing.

“The ECB may potentially cut by 25 basis points in June and then hold for a month or two in order to assess its impact,” said Daniela Hathorn, senior market analyst at Capital.com.

“But out of the major central banks, the ECB looks the most likely to cut.”

European stocks had a stellar run in the previous two quarters, before pausing in April as geopolitical tensions and concerns around a weak earnings season overshadowed optimism of an imminent rate cut.

Evotec slumped 32% after the German biotech firm announced a disappointing 2024 outlook.