European equities dip as investors track Mideast updates, corporate earnings

EUROPEAN shares slipped on Wednesday as the evolving situation in the Middle East kept investors cautious, while they also assessed a range of corporate earnings.

The pan-European Stoxx 600 index dipped 0.4 per cent to 617.27 points.

Most major regional bourses were lower, with Spain’s IBEX 35 down 0.5 per cent, while France’s CAC slipped 0.6 per cent. Markets weighed conflicting headlines, after US President Donald Trump said the war with Iran could end soon. However, Iran’s joint military command warned it would act to disrupt trade flows in the Gulf, the Sea of Oman and the Red Sea if the US blockade of its ports continued.

Optimism surrounding a diplomatic resolution has helped the Stoxx 600 recover from its March lows, but worries over the impact of soaring oil prices have caused European equities to underperform against Wall Street.

“European companies are very much dependent on oil prices. Big exporters like Germany are suffering ... and that is having a negative impact on European markets,” said Axel Rudolph, senior market analyst at IG Group.

“That’s why they’re underperforming. Nobody sees the oil price coming down anytime soon, even if we were to have a peace agreement tomorrow.”

The European Union warned member countries that a prolonged supply shock due to the Iran conflict would force cuts to fuel consumption, EU diplomats told Reuters.

Luxury sector struggles

Corporate earnings remained a key focus for investors. Hermes plunged 8.2 per cent after the French luxury group reported a hit to first-quarter sales linked to the Iran war.

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Sales at Kering’s Italian flagship brand Gucci dropped by 8 per cent in the first quarter from the previous year. Shares of the luxury fashion group tumbled 9.2 per cent. Luxury sector led losses with a 2.5 per cent drop and is the worst-performing sector so far this year.

“Even large luxury names are not immune to a cooling in demand given that shoppers are no longer flying to the Middle East. In Europe, people at the moment are more worried about their wallets so luxury goods’ shopping is on the back burner,” Rudolph added.

The technology sector slipped 0.3 per cent. ASML fell 4.2 per cent, weighing on the sector, even after the supplier of chipmaking tools raised its 2026 revenue outlook. A bright spot, Aixtron surged 20 per cent to its highest level in two years after the German chip systems manufacturer raised its revenue guidance for 2026.

Shares of financial services groups supported the index. Dutch payment processing company Adyen, UK’s Wise, Italy’s Nexi and France’s Edenred rose between 3.7 per cent and 5.8 per cent.

On the monetary policy front, European Central Bank President Christine Lagarde said the bank is not yet in a position to determine if the inflation shock driven by oil prices is transitory or requires the bank to raise interest rates.

The chances of a rate hike at the central bank’s April meeting eased and were last at around 24 per cent, down from 50 per cent on Monday, according to LSEG data. REUTERS