* STOXX 600 down 0.8 percent
* Yields at 2-year highs weigh on equity sentiment
* Ryanair falls after results strike cautious tone
* Chipmakers suffer sell-off (Adds detail, quotes. To see Reuters' live blog on European equity markets, type LIVE/ in an Eikon news window)
By Helen Reid
LONDON, Feb 5 (Reuters) - European stocks suffered a sharp sell-off at the open on Monday, tracking big drops in Asia as growing inflation expectations and rising bond yields took their toll on equity markets.
The pan-European index hit a two-month low in early dealing, having given back all the gains it made in the exuberant new year rally. German bond yields hit a two-year high as fears of inflation drove a sustained sell-off in bond markets. major European equity markets, only Spain and Italy are still higher than at the turn of the year, with Britain the worst performer.
"Many sentiment and technical indicators were suggesting the market was overbought in late January, so part of this sell-off can be attributed more to technical than fundamental factors," said Edward Park, investment director at Brooks Macdonald.
All sectors were in the red on Monday, but the sell-off hit the highest-valued parts of the market hardest, with tech stocks .SX8P tumbling 1.3 percent.
"Growth sectors such as technology are particularly sensitive to expectations around future inflation and interest rates," Park said.
"As their growth story is predicated on strong earnings further down the line, any change in the discount rate affects growth companies significantly more than value sectors."
Company earnings provided little solace to investors.
Ryanair RYA.I fell 3.2 percent after the airline struck a cautious tone about fares and potential disruption from pilot unions, though it reported rising profits. and leisure stocks .SXTP were among the worst-performing, down 1.3 percent as shares in airlines Air France AIRF.PA , easyJet EZJ.L , IAG ICAG.L and Lufthansa LHAG.DE fell.
Overall Europe has so far seen more earnings misses than beats for the first time since the fourth quarter of 2014, Morgan Stanley (NYSE: MS ) analysts said.
While the earnings season was still in its early days, Morgan Stanley also found post-results price performance showed a clear negative skew, indicating investors are quick to punish companies for missing earnings and sales expectations.
Analysts began revising earnings down last week, I/B/E/S data showed, as the equities sell-off deepened.
Fiat Chrysler FCHA.MI fell 1.5 percent after sources told Reuters late on Friday that the U.S. Justice Department was seeking "substantial" fines in the emissions case against the Italian carmaker. zone businesses increased activity in 2018 at their fastest pace in over a decade as new orders surged, survey data showed. the data showed the region's economic growth was sustained, it was not unambiguously positive for equities, as it could add to upward pressure on bond yields.
"Strong growth will provide little solace for equities or commodities if it pushes bond yields higher," Societe Generale (PA: SOGN ) analysts wrote.
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