Europe’s STOXX 600 clocks biggest quarterly gain in over five years on AI boost

[FRANKFURT] European shares registered their biggest quarterly rise in more than five years on Tuesday (Jun 30), boosted by optimism around artificial intelligence and signs of easing tensions in the Middle East.

The pan-European STOXX 600 index closed 0.9 per cent higher, after hitting an intraday record high. The benchmark marked a third consecutive monthly gain and climbed 10 per cent for the quarter, its strongest such performance since October 2020.

Most major STOXX 600 sectors were higher on Tuesday, with technology stocks leading the charge with a 2.5 per cent gain. They clocked their biggest quarterly jump since October 2001, underscoring robust demand for AI infrastructure. The sector is also on track to outperform its Wall Street counterpart this month and quarter.

Chip equipment maker ASML rose 6.8 per cent on Tuesday, while chipmakers STMicroelectronics and Infineon added 1.4 per cent and 4.4 per cent, respectively. Shares of Siemens Energy added 5.6 per cent after the AI equipment maker reiterated strong demand trends at a quarterly earnings call on Monday.

“What’s different about Europe is: you’re not paying for that (economic) growth commonly ... and with companies that are less exciting than US tech, or maybe Asian semis, that’s creating quite a lot of opportunities in attracting value stocks,” said Rob Lancastle, portfolio manager at J O Hambro Capital Management.

“Around the rest of the world, you often pay a lot more and you have a lot more earnings risk,” he added.

Global equities have rallied this quarter on AI enthusiasm, with the US and Asia at the forefront, while Europe’s smaller exposure to the tech sector has resulted in it playing catch up for most of this period. Signs of easing Middle East tensions have also been a key driver this quarter as prices of oil slipped to pre-Iran-war levels, prompting Barclays and JPMorgan to turn bullish on European stocks.

Travel and leisure stocks, which had taken a hit due to the conflict, also bounced back and were up over 19 per cent this quarter – their biggest jump since January 2023. The focus is on the ongoing annual European Central Bank conference, where investors are awaiting commentary from policymakers.

The policymakers warned that the oil-price shock will linger in the economy for some time. Traders anticipate European interest rates to rise by another 25 basis points by year-end, according to LSEG-compiled data. Among individual stocks, Abivax jumped over 38 per cent on Tuesday after the French drugmaker reported positive topline results for its obefazimod study.

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European shares steady as tech gains offset Middle East caution

Among laggards, customer services firm Teleperformance fell 11.5 per cent after US peer Concentrix cut its profit forecast.

Software companies Capgemini lost 2.9 per cent and SAP dropped 1.9 per cent. REUTERS