Europe close: Banks, chip stocks pull markets lower

European stocks fell sharply on Thursday as weakness in the banking and chip sectors provided a big drag on regional indices.

The pan-European Stoxx 600 index was down 1.1% at 637.73, with heavy losses in Milan, Madrid and Paris in particular showing significant losses given their heavy weighting towards banks, which fell as a result of a sell-off of European government bonds.

French 10-year OAT yields climbed further above the 5% level, up 7.5 basis points at 5.076% to hit their highest since 2002, due to rising fiscal and political concerns. The sell-off saw borrowing costs rise elsewhere in the eurozone, with 10-year yields rising in Germany, Italy and Spain.

Meanwhile, Brent crude was up 2.2% at $111.18 a barrel and West Texas Intermediate was 1.3% stronger at $98.37, after Houthi attacks in Saudi Arabia heightened fears that the conflict in the Middle East was intensifying.

In equity movements, Milan-listed banks UniCredit, Intesa Sanpaolo, Banco BPM, BPER and Monte dei Paschi all fell sharply, along with Madrid-listed peers Santander, BBVA, CaixaBank, Sabadell and Bankinter.