European tech selloff offsets utility gains amid Middle East tensions
Escalating Middle East hostilities and a sudden aversion to tech earnings pushed the STOXX 600 lower, highlighting the high threshold companies must clear to attract capital ahead of a crucial ECB decision.
The pan-European STOXX 600 index fell 0.34% to close at 641.53 points on Friday, leaving the benchmark largely flat for the week. The decline was driven by a steep selloff in technology stocks and rising energy prices triggered by military strikes in the Middle East.
Tech stocks dropped 3.27% over the week. The segment failed to rally even after ASML, the dominant chip equipment supplier, raised its 2026 sales forecasts. This subdued reaction underscores the increasingly high bar companies must clear to attract buyers, as sentiment toward major artificial intelligence winners sours and inflation uncertainty persists.
Oil prices climbed as military actions escalated. The U.S. struck bridges and an airport in Iran on Friday, prompting Tehran to hit a power and desalination plant in Kuwait, a Gulf state that hosts U.S. airbases. The resulting rise in energy prices immediately shifted market attention toward monetary policy.
Focus is now turning to the European Central Bank, which is widely expected to keep interest rates unchanged when it meets on July 23. However, investors continue to anticipate a second rate hike later in the year, a scenario that would further complicate the equity outlook.
Utilities were the standout performers on Friday, rising 1.55% to lead the benchmark. Luxury stocks posted the strongest gains for the full week, though the sector showed underlying fractures. Burberry slid 6.38% after the luxury group revealed that the Middle East conflict had directly weighed on tourist spending across Europe.
Defence and industrial names saw sharp moves. Swedish aerospace and defence group Saab surged 9.73% after reporting a larger-than-expected increase in second-quarter operating profit. Private equity firm EQT gained 11.02% after Australia's Perpetual rejected its sweetened A$2.5 billion ($1.75 billion) takeover proposal.
Norwegian recycling company Tomra Systems jumped 11.87% on upbeat quarterly results. Conversely, Swedish tech company Lagercrantz fell 7.09% following downbeat core earnings. Volvo Group dipped 0.64% despite posting a 35% jump in second-quarter profit, illustrating the exact valuation fatigue plaguing the market.
