Europe’s Stoxx 600 ends lower as tech sell-off, rising US Fed hike bets weigh

[BENGALURU] Europe’s benchmark Stoxx 600 closed lower on Tuesday (Jun 23), as expectations for imminent interest rate hikes by the US Federal Reserve and concerns around increased corporate spending on artificial intelligence dented sentiment.

The pan-European index closed 0.7 per cent lower, after paring some of its earlier gains. It had hit its lowest level since Jun 12, with most sectors trading in negative territory.

Stocks in Asia fell earlier in the day and those on Wall Street also saw sharp declines. Crude oil fell about 1 per cent while gold slipped more than 2 per cent.

The tech sector was the biggest weight on the Stoxx 600 with a 3.7 per cent fall, logging its biggest daily drop since February as investors globally reassessed companies that rallied earlier this quarter on AI enthusiasm.

Chipmakers Infineon and STMicroelectronics declined 6.3 per cent and 8.5 per cent, respectively, while semiconductor equipment makers ASML and Aixtron slipped 5.7 per cent and 8.3 per cent, respectively.

European tech stocks have been the biggest gainers among major sectors this quarter. However, as borrowing costs tick higher, companies banking on debt-backed spending are likely to come under pressure.

Infineon and STMicroelectronics are among those that have recently tapped the debt markets.

“If...the companies need to continue raising debt before they are earning sufficient returns on that investment, investors could start to question the profile of the debt and the potential earnings sustainability on the equity side,” said Kiran Ganesh, managing director, global head of investment communications at UBS.

“This debt issuance is a trend that investors will need to keep watching out for the next one or two years.”

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European shares slip on Fed hike bets, tech drag

Alongside, investors raised bets on monetary policy tightening in the US, with traders now pricing in a 25 basis-point hike and an over 50 per cent chance of another similar increase by end-2026, LSEG-compiled data showed.

Markets are also holding on to bets that the European Central Bank (ECB) will lift borrowing costs by another 25 bps later this year, despite ECB President Christine Lagarde downplaying second-round inflation fears on Monday.

Traditionally defensive sectors gained, with healthcare up 1.9 per cent and consumer-facing stocks such as food and beverages up 1.7 per cent.

European mining shares shed 3.3 per cent, tracking declines in precious metal prices.

Among others, Bunzl topped the Stoxx 600 with a 5.6 per cent rise after British business supplies distributor upgraded its annual revenue growth outlook after a strong first half.

Signify plunged 14.8 per cent after the world’s largest lighting company updated its strategy to target an adjusted EBITA margin of around 10 per cent by 2029. REUTERS