European stocks fell on Tuesday following the latest indication that the region’s economy is in better health than expected, leaving central banks scope for further monetary tightening.

The Europe-wide Stoxx 600 and Germany’s Dax fell 0.8 per cent. France’s CAC 40 lost 0.7 per cent.

The declines came after closely watched surveys of private sector activity in the eurozone showed faster than expected expansion. Signs of economic resilience could encourage the European Central Bank to lift interest rates further as it seeks to curb high inflation. That would probably boost the euro, but could weigh on eurozone stock markets.

“If we see confirmation that there is growth improvement it will help the euro,” said Francesco Pesole, forex strategist at ING. “At the same time there are concerns on the geopolitical side holding back risk appetite, like the anniversary of Ukraine invasion and speculation about a new offensive from Russia.”

ECB governing council member Olli Rehn said on Monday that the ECB would probably meet its terminal rate during the summer, but that inflation was “excessively high”.

“With inflation so high, further rate hikes beyond March seem likely, logical and appropriate . . . I assume that we will reach the terminal rate in the course of the summer,” he said.

The data also dragged down bond markets, pushing German 10-year yields up 0.03 percentage points to 2.49 per cent. Yields on 10-year US treasuries rose 0.04 percentage points to 3.87 per cent.

Futures tracking the blue-chip S&P 500 slipped 0.6 per cent, and the technology-heavy Nasdaq 100 fell 0.8 per cent, indicating further losses at Tuesday’s open following last week’s declines. US markets were closed on Monday for Presidents’ Day.

The dollar index, which measures the greenback against a basket of six peer currencies, gained 0.2 per cent.

Brent crude fell 0.3 per cent to $83.80 a barrel, while the US equivalent WTI gained 0.9 per cent to $77.

In Asia, the Hang Seng index fell 1.7 per cent, while China’s CSI 300 gained 0.3 per cent after gaining 2.45 per cent on Monday — its best one-day performance since late November. The index was risen 6.6 per cent this year.

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