European shares eke out slim gains on luxury rebound even as war risks persist

EUROPEAN shares ended on Wednesday (Jul 15) with slim gains as a strong rebound in luxury stocks countered weakness in telecom and technology shares, but escalating Middle East tensions continued to weigh on sentiment.

The pan-European Stoxx 600 index inched 0.12 per cent higher to 642.84 points.

Investors had hoped that the start of the earnings season this week would redirect attention away from geopolitics and back to corporate fundamentals, providing a fresh impetus to equities.

But the Stoxx 600 has gained just 0.27 per cent so far this week, and ASML ended 0.41 per cent lower on the day, erasing gains from earlier in the session despite raising its 2026 sales forecasts.

Although several heavyweights are yet to report results, the limited optimism in markets on Wednesday illustrates the high bar corporations have to clear to lure investors to equities, especially as the US-Iran conflict rages on.

“While there is some good earnings news and some positive news for some stocks in Europe, the bigger picture is that we may be a little bit more defensive, just because of geopolitical risk once again,” said Michael Metcalfe, head of macro strategy at State Street.

The US conducted a new wave of strikes against Iran, while Teheran threatened to shut off more regional energy exports.

Rate uncertainty

The conflict has sparked uncertainty about interest rates, as central banks around the world try to gauge what the inflationary impact of the war will be.

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European Central Bank policymakers called for vigilance in setting interest rates on Wednesday but stopped short of advocating for tighter policy, noting long-feared second-round inflation effects had yet to materialise.

Germany’s benchmark declined 0.59 per cent, weighed down by Infineon Technologies’ 6.28 per cent drop.

Still, the government’s plan for higher defence spending “is significant enough that it should be able to drive that market for a number of years,” said Benjamin Hall, vice-president, alpha research at Segal Marco Advisors.

Last week, Germany’s cabinet approved the first draft of ‌the 2027 budget, ramping up investment and defence spending to shield its sluggish economy from war-related energy shocks and years of under-investment.

Technology stocks fell 0.53 per cent, while luxury shares, the worst performing index this year, added 3.22 per cent.

Richemont surged 6.68 per cent after reporting better-than-expected results for its first quarter, helped by booming demand for its jewellery in Asia and the Americas.

Software developer Nagarro lost 1.82 per cent after Germany’s financial watchdog BaFin launched an enforcement review of the firm’s 2022 consolidated financial statements.

Axfood fell 14.89 per cent after reporting quarterly results below estimates. REUTERS