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        * 
      STOXX 600 falls for second straight day
    

        * 
      Microsoft's outlook weighs on the tech sector
    

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      German business morale brightens further in Jan
    

  
 (Updates to market close)
    By Ankika Biswas and Amruta Khandekar
       Jan 25 (Reuters) - European stocks slipped on Wednesday
as lacklustre results from U.S. software giant Microsoft fanned
fears about the outlook for the tech sector, while investors
remained concerned that central banks were not yet close to
pausing their interest rate hikes.
    The pan-European STOXX 600  .STOXX  fell for a second day,
closing down 0.3% but off a near two-week low hit earlier in the
session.
    Technology shares  .SX8P , which have rebounded this year
after a rough 2022, fell 0.4% as Microsoft  MSFT.O  forecast
current-quarter cloud business revenue below estimates.
    "The weak outlook painted by Microsoft is weighing on the
wider tech sector," said Michael Hewson, chief markets analyst
at CMC Markets in London.
    Energy  .SXEP  and industrial firms  .SXNP  were also big
drags on the STOXX 600, falling 0.9% and 0.8% respectively.
    Equities have rallied this year on hopes that the Federal
Reserve and other major central banks were close to hitting the
brakes on interest rate hikes as inflation eases. 
    However, such hopes have been doused in recent days by
hawkish messages from European Central Bank (ECB) policymakers
as well as an improvement in euro zone economic activity that
has spurred speculation that the central bank might have more
room to raise rates. 
    European Central Bank policymakers Joachim Nagel and Gabriel
Makhlouf on Wednesday said they wouldn't be surprised if
policymakers needed to keep increasing interest rates beyond
March.
    Economists at Deutsche Bank no longer expect a euro zone
recession in 2023 and also lowered their inflation outlook, but
don't see the ECB taking their foot off the hawkish pedal just
yet.
    German business morale brightened in January as Europe's
largest economy started the new year with easing inflation and
an improved outlook, the Ifo institute's survey showed.
    Europe's earnings season kicks into gear next week. Earnings
for STOXX 600 companies are expected to have increased 9.5% in
the fourth quarter from a year earlier, down from 10.7% a week
ago, according to Refinitiv data.
     Corporate results from some European companies such as
semiconductor firm ASML Holding NV  ASML.AS  on Wednesday
offered some reasons for optimism about the region's corporate
health.
    Netcompany Group A/S  NETCG.CO  tumbled 21.2% to the bottom
of the STOXX 600 after the Danish IT services provider's EBITDA
outlook missed analysts' expectations.
     Shares of  Lonza  LONN.S  jumped 7.5% as the Swiss drug
contract manufacturer said it will buy back shares worth 2
billion Swiss francs ($2.17 billion).
 (Reporting by Ankika Biswas and Amruta Khandekar in Bengaluru;
Editing by Subhranshu Sahu and Sherry Jacob-Phillips, Kirsten
Donovan)
 ((Ankika.Biswas@thomsonreuters.com;))