Mixed earnings reports and fading hopes for US interest rate cuts dented European shares yesterday, while sterling hit 14-year peaks against the yen and the dollar as investors continued to seek higher yields.

Oil prices recovered some ground, rising above $53 a barrel, while euro zone government bonds steadied despite further comments on the need for higher interest rates from European Central Bank (ECB) .

Markets have been eyeing global interest rate prospects closely in recent weeks, with the ECB expected to continue raising borrowing costs, the Bank of England surprising markets with a hike earlier this month and stronger-than-expected data denting forecasts for rate cuts from the Federal Reserve this year.

Sterling benefited from expectations that higher UK rates will improve its yield advantage.

It climbed to a peak of $1.9846 versus the dollar and above 241 yen, both the highest since Britain was forced to abandon Europe’s exchange rate mechanism in 1992.

The prospect of higher global interest rates has stalled stocks near recent peaks as investors worry that valuations will look less attractive and earnings growth could suffer.

Europe’s FTSEurofirst 300 was down 0.2 percent to 1,510.6 points as earnings reports and trading updates came in mostly on the softer side of expectations.

Shares in recently formed Alcatel-Lucent fell 10 percent after the company said it expects a drop in earnings for the fourth quarter. UK sugar company Tate & Lyle tumbled 15 percent after warning its annual pre-tax profits were likely to be below expectations.

Also weaker was Germany’s Software AG, which fell 2.9 percent after posting fourth-quarter results slightly shy of market expectations.