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July 14 Reuters European shares fell on Thursday, as rising bets of more aggressive rate hikes by the Federal Reserve fed into recession fears, while Italy39;s main index tumbled 2.2 as the country39;s government faces collapse.

The panEuropean STOXX 600 index slipped 0.7 with losses being largely broadbased. It had fallen 1 on Wednesday when U.S. inflation hit a near 41year high, spurring bets that the Fed could go for a bigger hike than the 75basispoint move markets had priced in for this month.

Global equities have taken a hit this year as central banks attempt to tame surging inflation, leaving investors worried about the impact on economic growth. The STOXX 600 is down about 16 so far this year, while the SP 500 and a gauge of world stocks are down about 20 each.

There is a recessionary fear that continues to be on top of investor minds, said Bert Colijn, senior economist, eurozone, at ING.

But he adds that worries also stem from a bigger discrepancy between the European Central Bank and the Fed as the former is seen sticking to a 25basispoint hike next week despite inflation at record highs.

Energy, banks and miners were among the biggest drags on the STOXX 600, while defensive sectors such as healthcare, telecoms and real estate fell between 1 and 2.3.

Meanwhile, a euro at parity to the dollar is seen as more trouble for…