(Reuters) – A three-day rally in European stocks was clipped on Thursday as a renewed jump in U.S. bond yields hit risk appetite, with heavyweight miners and technology stocks leading the retreat.

The pan-European STOXX 600 index fell 0.5%, with miners dropping 3.4%. UK-listed shares of Rio Tinto and BHP Group shed 5.9% and 5.0% respectively, after their Australia-listed stocks were hit by ex-dividend trading.

Technology stocks, the driver of the market’s rebound from pandemic lows, fell close to 2% on overnight weakness in their Wall Street peers as rising yields turned the spotlight on frothy valuations.

Dutch firm ASML Holding NV dropped 3.1% despite news that it had extended a deal to sell chip manufacturing equipment to China’s largest chipmaker SMIC.

“While one can understand why investors are concerned about valuations in the U.S., particularly around the tech sector… the same can’t be said in Europe where valuations are much lower,” Michael Hewson, chief market analyst at CMC Markets wrote in a note.

“This is likely to limit any downside for markets in Europe, even if yields do continue to edge higher in the US.”

The 10-year U.S. Treasury yield, the benchmark for global borrowing costs, rose past 1.45% on Wednesday as investors anticipated a rise in inflation due to the fiscal and monetary stimulus launched to shore up the economy and as vaccination programmes progress.

Market participants are waiting to see if Federal Reserve Chairman Jerome Powell will address concerns about the risk of a rapid rise in long-term borrowing costs later in the day.

Meanwhile, European Central Bank policymaker Klaas Knot said the recent rise in euro zone borrowing costs may reflect improved growth and inflation prospects.

Gains for defensive sectors such as utilities, food & beverage and real estate helped limit the losses.

German broadcaster Prosiebensat.1 Media fell 7.3% after it forecast its revenue and profits would grow in single digits this year, after a strong showing in the fourth quarter.

German airline Lufthansa slipped 0.7% as it posted record losses for 2020 and trimmed its 2021 capacity plans as COVID-19 disruption drags on.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Subhranshu Sahu and Sriraj Kalluvila)

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