Europe: Tech stocks' surge to 17-year peak a bright spot among stocks

[MILAN] A buoyant European tech sector, which hit a 17-year peak on Tuesday, was not enough to lift the broader European market as jitters over politics in the periphery persisted.

The pan-European Stoxx 600 gave up gains to end the session with a 0.3 per cent loss, weighed down by weaker banking stocks, and bringing two sessions of straight gains to an end.

However, the tech index was a bright spot, up 1.5 per cent and hitting its highest since June 2001 with sentiment boosted by Apple shares trading at record levels and Microsoft gaining on news of an acquisition.

"All big names from Apple to Amazon and Microsoft are able to make huge buybacks and acquisitions and the internal growth of most of these companies is pretty much in line with expectations," Prime Partners equity analyst Jerome Schupp.

"For sure valuations are not the same as one or two years ago. If you just look at valuations, let's say of Amazon, you don't buy because they're pretty expensive," he said.

Dutch chipmaker ASM was among the biggest gainers, up 5.8 per cent after Credit Suisse started coverage of the stock with an "outperform" rating, citing expectations of healthy growth due to the increasing complexity of semiconductors.

Prime Partners' Schupp also said companies like software maker SAP or chipmaker Infineon were doing relatively well, even though he said the size of the US market provided investors with more options to gain tech exposure.

SAP was up 1.2 per cent and Infineon gained 2.7 per cent.

The IT sector has a weighting of only 5 per cent in the MSCI Europe index, compared to 26 per cent of the MSCI USA.

However, worries over Italian politics were not far away, given the rollercoaster that indexes saw last week when two anti-establishment parties managed to form a coalition, putting an end to three months of political deadlock.

Comments on Tuesday by Italy's new prime minister, Giuseppe Conte, promising to increase spending did not sit well with markets.

Shares in Italian banks Intesa Sanpaolo, Unicredit and BPER all fell 3.4 to 3.8 per cent, among the biggest fallers on Europe's banks index, which was down 1.7 per cent, the biggest sectoral faller.

RBS added further pressure with a fall of 5.3 per cent after the British government sold a 7.7-per cent stake in the bank for 2.5 billion pounds, realising a loss of more than two billion pounds on part of its investment in the lender it rescued in 2008.

REUTERS