European shares slip on Tuesday as global tech retreat weighs

EUROPEAN shares slipped on Tuesday (Jul 7), weighed down by a global selloff in tech stocks, while investors monitored the Nato summit for clues on which sectors could emerge as beneficiaries of increased spending.

The pan-European Stoxx 600 index closed about 0.7 per cent down at 646.29 points. The index had hit a record high on Monday, before settling lower.

After recovering from the shock triggered by the Middle East conflict, European equities have traded in a narrow range this week as investors await fresh cues from the earnings season and developments from the Nato summit.

Nato leaders unveiled arms deals worth tens of billions of dollars on Tuesday, driving home the message that ‌they are heeding US calls to spend more to defend Europe.

“This has been a rude, if necessary, wake-up call for European countries. While admittedly uneven, Europe has heeded the lesson and is now investing accordingly,” strategists at Atlantic Council, a Washington, D.C.-based think tank, wrote in a note.

Still, defence stocks slipped 2.5 per cent, while tech shares dropped 3.6 per cent on concerns that a quarter-long rally in chip stocks had overvalued the sector. Chip equipment maker ASML fell 7.3 per cent.

South Korea’s Samsung Electronics set the tone for the global tech selloff, with shares sliding despite strong forecasts, while the Nasdaq index on Wall Street slipped nearly 0.7 per cent.

“It’s part of a rotation to cheaper, less-loved, less tech-heavy sectors of the market. We’re seeing much more of a broadening out rather than leadership from a narrow group of stocks,” said Kathleen Brooks, research director at brokerage XTB.

However, the moves point to a market taking a breather after a strong run, rather than a broader loss of confidence, according to David Morrison, senior market analyst at Trade Nation.

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“Market sentiment remains constructive. Falling energy prices, softer euro zone inflation data and signs of cooling labour market conditions in the United States have helped support risk assets,” he said.

French chip materials supplier Soitec tumbled 17 per cent. Circuit board manufacturer AT&S dropped 10.4 per cent and Franco-Italian chipmaker STMicroelectronics lost 8.1 per cent.

Siemens Energy fell 8.9 per cent after brokerage Barclays downgraded the company to “underweight” from “equal-weight”.

Sweden’s defence equipment maker Saab gained 4.1 per cent after brokerage Morgan Stanley upgraded the stock to “overweight” from “underweight”. Nato also said that it will purchase up to 10 of the company’s GlobalEye surveillance planes.

Renault gained 0.7 per cent after a report that China’s BYD had twice explored taking a stake in the French carmaker.

Shell rose 3.4 per cent after the energy giant slightly raised its second-quarter integrated gas outlook. REUTERS