European shares end near two-week highs on defence, tech boost

[BENGALURU] European shares finished near two-week highs on Wednesday (May 20), aided by defence and technology stocks, as investors awaited a critical earnings report from US chip giant Nvidia, and while caution remained on the US-Iran stand-off in the Middle East.

The pan-European Stoxx 600 ended 1.6 per cent higher at 620.29 points, with major indexes in the region, including Germany and France, up over 1.4 per cent each.

Global investors are keen on artificial intelligence bellwether Nvidia’s results, coming after the US markets close later in the day that could offer clues into how demand for AI infrastructure was faring.

Reuters reported that ASML expects the booming global semiconductor market to be “tense” with tight supply as demand from AI, satellites and robots outpace what the industry can produce. The chip-making machine giant’s shares were up 6.7 per cent.

More broadly, European technology stocks jumped 2.9 per cent, and the sector has seen the biggest gains this quarter on the Stoxx 600. Semiconductor shares such as ASM International and STMicroelectronics were up 3.9 per cent and 6 per cent on Wednesday.

“ASML has rather lagged the rally that we have seen in semiconductors as a whole. So we think there’s scope for strong earnings momentum there,” said Paul Wild, European equity fund manager at J O Hambro Capital Management.

“I’d be a little bit more cautious in terms of some of the chip companies themselves,” he said, adding that valuations among EU semiconductors have surged.

Wild said that AI equipment stocks such as Legrand and Schneider Electric offered better exposure to the global rally. Both stocks were up over 3 per cent.

Still, given Europe’s small AI tech exposure, the sector’s gains have not been able to lift the Stoxx 600 to record highs, similar to the rallies seen in the US and Asia.

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European shares dip as Middle East caution lingers

Meanwhile, investors were also keen on any progress on US-Iran negotiations after US President Donald Trump asserted the war would be over “very quickly”.

Defence shares jumped 3.2 per cent and led sectoral gains, with Czech firm CSG adding 8.7 per cent after its first-quarter results. UK’s Babcock rose 5.3 per cent after brokerage Peel Hunt upgraded the stock to “buy” from “add”.

Retailer Marks & Spencer jumped 6.6 per cent after forecasting profit growth for the next year despite a slide in annual profit due to a cyber hack disruption.

Norwegian industrial investment company Orkla slumped almost 6 per cent after posting a profit decline warning on increasing expenses amid the Middle East conflict.

Meanwhile, the European Union struck a provisional agreement to remove import duties on US goods, as part of a trade deal with Washington last July. REUTERS