European shares notch modest gains as US-Iran conflict tempers earnings cheer
Europe headed for strongest earnings season since 2022
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EUROPEAN stocks posted slim gains for the third straight session on Thursday (Jul 16), as caution over the Middle East war kept markets in a tight range despite strong earnings.
The pan-European Stoxx 600 index inched 0.16 per cent higher to 643.73 points. So far, hopes that the earnings season would pull attention away from geopolitics and back to corporate fundamentals, thereby offering equities a fresh catalyst, have not borne fruit.
The Stoxx 600 index is up just 0.41 per cent this week, despite strong results from ASML, the dominant supplier of equipment needed to make high-tech computer chips.
On Thursday, basic resources stocks were the biggest laggards on the benchmark, with a decline of 1.38 per cent. Media shares led the index with a 1.43 per cent gain.
Tech stocks were flat despite Taiwan’s TSMC reporting a record 77 per cent jump in second-quarter profit. ASML jumped 3.16 per cent, while semiconductor stocks STMicroelectronics and BE Semiconductor slipped 4.91 per cent and 3.20 per cent, respectively.
The sector has shown signs of cooling in July following a strong run in the previous quarter. Still, investors continue looking ahead to what is expected to be Europe’s strongest earnings season in more than three years.
“The thing that Europe has going for it is that valuations are much more favourable. And that hasn’t changed,” said Randy Baron, portfolio manager at Pinnacle Associates.
Renewed US-Iran hostilities have prompted investors to ramp up bets for at least one 25-basis-point rate hike by the European Central Bank by the end of 2026, data compiled by LSEG showed. But if the conflict eases, Europe’s investment outlook could brighten again.
“For the time being, we prefer to be neutral (on) US versus Europe, and slightly overweight Europe as far as we believe the conflict can abate again,” said Michele Morganti, senior equity strategist at Generali Investments. “We think that Europe can then recover in terms of the economic momentum, and earnings can recover too.”
Among individual companies, shares of Delivery Hero were flat. Uber said it launched a public takeover offer valuing the German food delivery company at about US$14.8 billion.
Delivery Hero has rallied nearly 70 per cent so far this year following reports of the imminent bid.
ABB slipped 5.91 per cent after it announced a US$5.5 billion takeover of automation company Rotork, and it said its second-quarter operating profits beat expectations. Rotork’s shares soared 66.78 per cent.
In regional earnings, Swedish industrial technology group Indutrade jumped 17.08 per cent after reporting better-than-expected second-quarter results.
Telenor tumbled 11.64 per cent after the Norwegian telecom operator cut its 2026 outlook following weaker-than-expected second-quarter earnings.
French advertising group Publicis rose 3.07 per cent after reporting higher first-half revenue, driven by strong demand for AI-driven marketing services. REUTERS
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