UPDATE 3-European shares drop as high yields spark profit taking in tech, resources

* Bond proxy sectors the worst performers in Feb
* Tech leads losses for the week
* Travel, bank stocks shine in Feb

(Updates to market close)
By Shashank Nayar and Ambar Warrick
Feb 26 (Reuters) - European stocks closed lower on Friday,
ending three weeks of gains as investors booked profits in
technology and commodity-linked shares due to concerns over
rising inflation and interest rates on the back of a jump in
bond yields.
The benchmark European stock index .STOXX fell 1.6%, and
shed 2.4% for the week - its first weekly loss this month - with
technology stocks .SX8P losing the most as they continued to
retreat from 20-year highs.
On the day, resource stocks .SXPP were the
softest-performing European sectors, tumbling 4.2% from a near
10-year high in their worst session in five months.
"Equity markets across the U.S. and Europe are quite
expensive now and with bond yields constantly rising, the fixed
income market is proving to be more attractive than the riskier
equity market," said Roland Kaloyan, a strategist at SocGen.
"Investors are actually looking at the pace at which yields
drop and the current speed is quite concerning for equity
markets."
U.S. and euro zone bond yields retreated slightly on Friday,
but stayed close to highs hit this week as investors positioned
for higher inflation this year. Yields were also set for large
monthly gains. GVD/EUR US/
Sectors such as utilities .SX6P , healthcare .SXDP and
other staples - usually seen as proxies for government debt due
to their similar yields - lagged their European peers for the
month as investors sought better returns from actual debt.
Still, the benchmark STOXX 600 gained in February, helped by
a rotation into energy, banking and mining stocks on
expectations of a pickup in business activity following vaccine
rollouts.
Travel and leisure .SXTP was the strongest sector in
February as investors bet on an economic reopening boom. Banks
.SX7P also outperformed their peers thanks to higher bond
yields.
Better-than-expected fourth-quarter earnings have also
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.
"As recovery hopes gain ground with the economy re-opening
and vaccines coming up, coupled with earnings being relatively
positive, the near-to-mid-term outlook for equities seems
positive with yield movements still a part of the equation,"
said Keith Temperton, an equity sales trader at Forte
Securities.
Among individual movers, Belgian telecom operator Proximus
PROX.BR was the worst performer on the STOXX 600 for the day,
after it flagged a lower core profit in 2021.