European shares steady as tech gains offset Middle East caution

[FRANKFURT] European shares closed flat on Monday (Jun 29), with gains in technology stocks offset by declines in construction firms, while investors mulled the durability of a US-Iran ceasefire after the two countries halted the latest bout of hostilities.

The pan-European STOXX 600 index closed 0.1 per cent higher, after narrowly marking gains last week.

The sell-off in technology stocks, which pushed the sector to its sharpest weekly fall since mid-March, stabilised on Monday with a 1.2 per cent gain. Chip stocks such as STMicroelectronics added 2.4 per cent. Europe’s exposure to AI stocks is much smaller than the US’ and Asia’s, where tech-driven rallies pushed regional benchmarks to record highs several weeks earlier.

“For us to start upgrading European stocks, we need to start seeing AI-driven productivity have an impact on European earnings. So far, we’re not there yet,” said Florian Ielpo, head of macro and multi-asset portfolio manager at Lombard Odier Investment.

Still, the European tech sector has benefitted from the global AI rally, putting it on track for the biggest quarterly gains on the STOXX 600. It has also outperformed the US S&P 500 tech sector at a time when worries about debt-backed spending weigh on Asian and Wall Street stocks.

Meanwhile, crude prices edged up slightly to US$72 a barrel as investors assessed shipments through the Strait of Hormuz, with a tenuous interim ceasefire prevailing between the US and Iran. The countries traded fire through the weekend before agreeing to halt hostilities and renew talks.

“Despite short-term violations, the US and Iran will agree to a deal ... we do not think that a deal would provide a long-term solution, but is more likely to be a patch to get oil flowing through the Strait,” said Mohit Kumar, an economist at Jefferies. The truce has prompted bullish outlooks from brokerages. JPMorgan was the latest to lift its year-end target for European equities.

Focus this week will be on the European Central Bank’s Sintra conference, where speakers include Federal Reserve chair Kevin Warsh and ECB president Christine Lagarde.

Traders are pricing in one more ECB rate hike of 25 basis points later this year, LSEG-compiled data showed. Dutch digital services operator Prosus gained 2.4 per cent after reporting an 84 per cent rise in full-year adjusted core profit. Private equity firm Bridgepoint rose 16 per cent after agreeing to acquire US real estate investment platform Kayne Anderson Real Estate for an enterprise value of US$1.39 billion.

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European shares steady as tech gains offset Middle East caution

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