European shares recovered some lost ground today, following their worst sell-off since June 2020, after upbeat earnings reports from Ericsson and Logitech provided support.

The top European stock index gained 0.7% after shedding 3.8% in the previous session on fears about aggressive monetary policy tightening moves by the US Federal Reserve and the potential for military conflict in Ukraine.

"We're in a world where most players in the market have never witnessed a rising rate environment. All they've had is the Fed pumping liquidity in, and now it's a shock for the participants," said Keith Temperton, sales trader at Forte Securities.

Investors expect the Fed to signal on Wednesday that it plans to raise rates in March after slashing borrowing costs to near-zero soon after the onset of the pandemic nearly two years ago.

Fed funds futures, which track short-term rate expectations, have priced in a total of four rate increases this year, as the central bank fights to stem soaring inflation.

Rate-sensitive banking stocks were the top gainers in Europe, up 2.9%, while stabilizing commodity prices helped lift sectors including basic materials.

Geopolitical turmoil, along with expectations of a hawkish stance from the Fed, is likely to keep volatility high, said Thomas Hempell, head of macro & market research at Generali Investments, but the recent selloff may ultimately offer buying opportunities.

"The pace of the global expansion is overall still consistent with modest upside for equities."

In earnings-driven moves, Swiss computer peripherals-maker Logitech International gained 6.2% after raising its earnings forecast for the current fiscal year.

Sweden's Ericsson jumped 7.6% as it reported fourth-quarter core earnings above market estimates, helped by higher sales of telecoms gear with more countries rolling out 5G networks.

Credit Suisse slipped 0.9% to hit a 20-month low after the scandal-hit lender warned it was likely to report a net loss in the fourth quarter as it flagged fresh legal costs and said business in its trading and wealth management divisions had slowed.

Watchmaker Swatch Group slipped 3.9% even as it forecast double-digit sales growth in local currencies this year.

US stock indexes slid today, with the S&P 500 on track to confirm a correction as a selloff in technology stocks ahead of the Federal Reserve's policy meeting overshadowed upbeat results from blue-chip companies including IBM and 3M.

By 6.10pm Irish time, the Dow Jones was down 379 points (1.10%) to 33,985, while the S&P 500 was down 80 points (1.83%) to 4,329 and the Nasdaq Composite was down 383 points (2.77%) to 13,471.

Speaking on Morning Ireland earlier, Paul Sommerville, CEO of Sommerville Advisory Markets said there has been huge volatility so far this year.

"We've had bigger draw downs on all the indices even more so than all of last year. Over 40% of the Nasdaq stocks are down 50% from their all time high."

He said there have been selling pressure for many weeks, citing last week as a good example, where the volatility index was up 50% in the US and the Nasdaq stocks were down over 7%, the S&P down 5% and the Dow Jones down 5%.

"That was nothing until yesterday. The volatility yesterday was absolutely off the charts, a very rare day on the markets," Mr Sommerville said.

"The only time we've seen this before was in 2008," he added.

He explained that the volatility is all about the Federal Reserve and its decision on interest rates, likely to be announced tomorrow.

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"The markets are very jumpy that the Federal Reserve is going to be putting up interest rates while the US economy is slowing," he said.

"What happens there is the highly speculative end of the market gets hit, so you've seen Bitcoin down 40%, all the Nasdaq stocks badly hit but other parts of the market not actually doing too badly, and its a real adjustment to a new environment," he said.

"Covid is going, interests are going up, economies are slowing around the world and when equity prices are very highly valued it's those kind of stocks that get very badly beaten up."

Will any signal on interest rates by Fed Chair Jerome Powell settle the markets?

"He'll probably try and calm the markets by saying he won't put up interest rates as fast as or by as much as the market is anticipating," Mr Sommerville said.

Additional reporting by Petula Martin