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European stocks held firm to show resilience in the face of a downbeat mood in Asia that was triggered by the worst sell-off in US technology stocks since March.

The region-wide Stoxx 600 accelerated early gains to edge 0.7 per cent higher on Wednesday, helped by a similar move on London’s FTSE 100 while Frankfurt’s Xetra Dax added 0.9 per cent.

The moves in Europe followed a third session of declines among Wall Street’s tech stocks. The Nasdaq fell 4.1 per cent on Tuesday, taking the tech-laden index into correction territory, defined as a decline of more than 10 per cent from a recent high.

However, Nasdaq futures tipped the tech benchmark to rise 0.6 per cent when US trading resumes, while the S&P 500 was expected to slip 0.5 per cent.

The gloom was compounded by drugmaker AstraZeneca’s move to pause a coronavirus vaccine trial after one participant suffered an adverse reaction, which could dent hopes of quick relief from the pandemic. Shares in the London-listed pharmaceutical company fell 2.7 per cent in early trading.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said that stocks remained attractive despite concerns that the recent accumulation of option positions in large tech names could prompt further selling.

“Taking the prior rally into consideration, this still leaves the indices at levels seen just four weeks ago,” he said. “Central bank liquidity is ample and has kept bond yields low, meaning stocks are relatively attractive to bonds.”

Yields on bonds have fallen recently, representing the shift to a more risk-off attitude among investors as they buy safer government debt. For example, the yield on German Bunds fell 0.012 percentage points on Wednesday to minus 0.507 per cent, down from as much as minus 0.4 per cent at the end of August.

Tech shares dragged equities lower across Asia Pacific, with Japan’s Topix closing down 1 per cent and Australia’s S&P/ASX 200 ending 2.2 per cent lower.

Shares in SoftBank fell as much as 7 per cent in Tokyo. Investors are concerned that SoftBank’s aggressive multibillion-dollar derivatives-based trading strategy has given it outsized exposure to the recent surge in US tech shares. The stock later trimmed losses to close 2.9 per cent lower.

The drop in the Nikkei left traders almost certain the Bank of Japan would make a large purchase of exchange traded funds during the session, its normal strategy for supporting the market on days when it drops significantly.

Line chart of Nasdaq Composite index showing US tech stocks drop into correction territory

In China, Shenzhen’s tech-focused ChiNext index lost 4.7 per cent while the broader CSI 300 dropped 2.3 per cent. In Hong Kong, the benchmark Hang Seng retreated 1 per cent as Chinese ecommerce group Alibaba shed as much as 2.7 per cent.

Tesla, the electric car maker, fell 21 per cent on Tuesday in its worst trading day, wiping more than $82bn from its market capitalisation. Apple and Microsoft fell 6.7 per cent and 5.4 per cent. The broader S&P 500 index shed 2.8 per cent.

“A market fuelled by central bank largesse, economic surprises and record earnings beats in the last few months was never going to maintain its heady pace forever,” said Kerry Craig, a global market strategist at JPMorgan Asset Management. But he added that “not all shocks are a warning of an impending collapse in risk sentiment”.

In currencies, sterling maintained its slide as tensions over UK trade talks with the EU prompted fears of a disorderly Brexit. It shed 0.4 per cent against the dollar to $1.294 on Wednesday, taking weekly losses to more than 2.5 per cent.

Oil prices dropped further on concerns that a resurgence in coronavirus cases would hobble a recovery in energy demand. Brent crude, the global benchmark, fell 0.7 per cent to $39.49 a barrel while US marker West Texas Intermediate dropped 0.4 per cent to $36.44.

“If this downward pressure on the market continues, Opec+ will become increasingly concerned,” said Warren Patterson, head of commodities strategy at ING. “There is always the potential that the group will look to re-implement the deeper cuts that we saw between May and July.”

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