Europe: Shares fall as chipmakers surrender gains, economic woes loom

EUROPEAN shares closed in the red on Thursday (Aug 24), as the early rally in chipmakers fizzled and miners snapped a three-day winning streak, while concerns over any economic downturn kept investors on edge.

The pan-European Stoxx 600 fell 0.4 per cent, reversing from a more than 1 per cent jump to a one-week high during the day.

The technology sector index had advanced nearly 2 per cent to a two-week high following the world’s most valuable chipmaker Nvidia’s stellar quarterly revenue forecast and buyback programme, but gave up gains through the course of the day to close 2.4 per cent lower.

In fact, it was the worst performer among sector indexes.

European chipmakers such as Infineon, Siltronic, Swiss-based Temenos, AMS Osram, VAT, Amsterdam-listed ASML Holding and ASM International, and BE Semiconductor all lost between 1.3 per cent and 6.3 per cent.

“We continue to be optimistic about what AI means in terms of operational performance, but this isn’t going to be driven by one company and one earnings report,” said Henk Potts, market strategist at Barclays Private Bank.

“Markets were not only putting Nvidia’s performance under a microscope but were seeing it as a bellwether for the AI revolution ... perhaps that reality is sinking in with the investment community this afternoon.”

Another headwind for the technology sector was rising eurozone bond yields, that among other factors have set the Stoxx 600 for its worst monthly decline this year.

It has also underperformed the US benchmark S&P 500’s near 15 per cent year-to-date advance with a 6.3 per cent up move on concerns over the weakening economic outlook for the eurozone and major importer China, and fears of interest rates remaining higher for longer.

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Europe: Shares pare gains on economic fears, Swiss stocks outperform on Roche boost

All eyes will be on remarks from European Central Bank (ECB) president Christine Lagarde and Federal Reserve chair Jerome Powell on Friday at the Jackson Hole Symposium.

Meanwhile, traders leaned towards an ECB rate-hike pause in September amid growing signs of economic woes on the continent, with the latest survey revealing a deeper-than-expected downturn in eurozone business activity, particularly in its largest economy Germany.

Further, Sweden’s finance minister noted its economy is facing a deeper economic downturn this year than previously predicted, but high inflation means the government cannot loosen fiscal taps in the autumn budget.

Miners lost 1 per cent, tracking lower metals prices, while a 0.5 per cent rise in financial stocks staved off a sharper and broader market fall.

Among individual stocks, Danish provider of allergy treatment products Alk-Abello jumped 7 per cent to top the Stoxx 600 after second-quarter operating profit almost doubled year-on-year, while Norway-based fish farmer SalMar gained 3.6 per cent after second-quarter results.

Meanwhile, Swedish games developer Embracer dropped 7.2 per cent to the bottom of the Stoxx 600, hitting an over one-month low. REUTERS