(Bloomberg) -- European equities fell to six-month lows on Wednesday, as conviction grew that central banks were set to keep interest rates high for a prolonged period of time.

The Stoxx 600 index slid 0.2% on the day, falling for a fifth straight session and ending at its lowest level since March. Germany’s DAX slipped 0.2%, while France’s CAC 40 was little changed, with both indexes plumbing six-month lows. The pan-European index is on track for its first lossmaking quarter of 2023.

“The higher-for-longer narrative remains the dominant driver,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital, referring to interest rate prospects. He reckons, however, that markets are overpricing the chance of further US and euro zone rate hikes for this year.

Among individual movers, Dutch insurer NN Group NV plunged the most since its listing after a court concluded that it shouldn’t have imposed certain costs and deductions on some unit-linked insurances. Retailer Hennes & Mauritz AB rallied after posting a bigger-than-expected earnings gain reducing an inventory backlog that’s plagued the company for more than seven years.

Read more: Deliveroo, Software Firms Are Top European M&A Targets in Survey

The recent falls mean the Stoxx 600 has now trimmed its 2023 advance to about 5%, less than half that of the US S&P 500. The European benchmark is trading below its 200-day moving average, while in Germany, the DAX is approaching technically oversold levels.

DayByDay technical analyst Valerie Gastaldy said while investors might buy the dip in the short run, stocks face further declines over the medium term. “The Call/Put ratio has been rising while prices were falling,” she wrote in a note. “This means investors have assessed the drop was an opportunity to buy. This is not how drops end usually.”

Barclays Plc strategists, on the other hand, said the outflows from European stock funds look overdone given the outlook for corporate profits. While overall equity positioning is now neutral, sector allocation is defensive, the team led by Emmanuel Cau wrote in a note.

Switzerland’s stock market resumed its slide, after gains made on back of recent Swiss franc weakness. The Swiss Market Index is the most international index in Europe, according to Goldman Sachs strategists, with about a third of revenue coming from each of North America and the rest of Europe, and less than 10% from the domestic market.

For more on equity markets:

  • Swiss Equities Have Means to Outshine During Rout: Taking Stock
  • M&A Watch Europe: Pendragon, Paschi, Flutter, Schott Pharma
  • Coty’s Paris Listing Bucks Trend Favoring New York: ECM Watch
  • US Stock Futures Rise; MillerKnoll Inc Gains
  • British Land Makes Headway on Regent’s Place: The London Rush

You want more news on this market? Click here for a curated First Word channel of actionable news from Bloomberg and select sources. It can be customized to your preferences by clicking into Actions on the toolbar or hitting the HELP key for assistance. To subscribe to a daily list of European analyst rating changes, click here.

--With assistance from Michael Msika.

©2023 Bloomberg L.P.