Europe: Shares slip as tech rally stalls, Middle East uncertainty weighs

[BENGALURU] European shares slipped on Friday (Jun 5) and ended the week lower, as uncertainty about Middle East peace efforts kept investors on edge and technology stocks paused after a blistering two-month rally.

The pan-European Stoxx 600 index was down 0.3 per cent at 622.66 points and lost 0.5 per cent for the week.

Brent crude fell for a second straight session, though prices remained near US$93 a barrel.

Hopes for a diplomatic breakthrough between the US and Iran appeared limited after the two countries exchanged strikes earlier in the week, while a US-brokered Israel-Lebanon ceasefire also looked fragile after Hizbollah rejected the pact. The resulting spike in energy costs has complicated the inflation outlook.

Data this week showed eurozone inflation accelerated in May, prompting markets to price in a 25-basis-point interest rate hike from the European Central Bank (ECB) next week.

“A hike is consistent with the data,” said a group of analysts at Deutsche Bank led by Mark Wall, in a note.

“A US-Iran deal would not prevent it. After three months of elevated energy prices, the ECB sees some indirect inflation as inevitable.”

Sentiment was also dented by stronger-than-expected US jobs data, which showed employers added far more positions than forecast in May. The figures reinforced expectations that the US Federal Reserve could raise interest rates later this year, adding pressure to global equities.

Technology stocks were among the top sectoral decliners with a 2.9 per cent drop, following a rally that has helped the shares gain about 30% in the past two months – the most among Stoxx 600 sectors. The pullback echoed a broader pause in global technology shares this week after disappointing results from US chipmaker Broadcom.

SEE ALSO

European shares rise as oil slips, investors watch Middle East

European chip stocks such as Infineon and Aixtron lost 9.1 per cent and 4.8 per cent, respectively, while artificial intelligence equipment makers Legrand and Schneider Electric slipped 2.3 per cent and 4.5 per cent, respectively.

Earlier this week, the European Commission proposed laws to boost domestic cloud, AI and semiconductor industries and cut reliance on US Big Tech, called the Cloud and AI Development Act and Chips Act 2.0.

“Tech is coming to Europe and will almost certainly be a story for the latter years or so of the current decade and the early years of the 2030s,” said Jeremy Batstone-Carr, European strategist at Raymond James.

The financial services sector was heading for a 0.8 per cent weekly loss after rising redemption requests from asset managers reignited concerns about strains in private markets.

Among other stocks, thermal processing services company Bodycote slid 13 per cent after saying Apollo Global Management does not intend to make the firm a buyout offer. Single-board computing company Raspberry Pi jumped 27.6 per cent, hitting a record high, after raising its full-year profit forecast. REUTERS