Euro Stoxx 50 futures slumped 1.7% by 0637 GMT, while FTSE futures and DAX futures fell 1.2% and 1.4%, respectively.
Asian markets fell to a one-month low, while the dollar rose from a three-year trough as the 10-year Treasury yield hit a one-year high of 1.614%, sparking fears the heavy losses could trigger distressed selling in other assets.
“This sharp push higher (in bond yields) appears to be starting to blow the froth off some of the more richly valued parts of the market, begging the question as to whether investors will move this cash into the weaker parts, which have been starting to show signs of life,” said Michael Hewson, a market analyst at CMC Markets UK.
High-flying technology stocks bore the brunt of this week’s selloff after powering the global stock market recovery from a coronavirus-induced crash last year.
Energy, banking and mining stocks, on the other hand, have outperformed the STOXX 600 on expectations of a pickup in business activity following vaccine rollouts.
Still, the benchmark European index is set to post its first weekly decline in four as assurances from European Central Bank chief Christine Lagarde and other policymakers have failed to stem the rise in yields.
On Friday, ECB chief economist Philip Lane said the central bank was monitoring the surge in government bond borrowing costs but would not engage in controlling the yield curve.
Meanwhile, better-than-expected fourth-quarter earnings have reinforced optimism about a quicker corporate rebound this year. Of the 194 companies in the STOXX 600 that have reported quarterly earnings so far, 68% have beaten analysts’ estimates, according to Refinitiv.
Germany’s Deutsche Telekom reported forecast-beating fourth-quarter results on Friday as its merged U.S. unit T-Mobile continued to drive growth.
On Wall Street, futures tracking the Nasdaq 100 shed 0.9%, a day after the Nasdaq Composite posted its biggest daily percentage fall in four months. S&P e-mini futures were down 0.4%. Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Sriraj Kalluvila