- The STOXX 600 fell 0.4 per cent as investors weighed earnings against geopolitical risks.
- Technology shares declined despite record profits at chipmaker TSMC.
- Rising Middle East tensions have fuelled fresh concerns over inflation and possible interest rate hikes.
European stocks slipped on Thursday as investors looked beyond a busy earnings season and turned their attention back to the growing conflict in the Middle East, which is raising fresh concerns over energy supplies, inflation and interest rates.
The pan-European STOXX 600 index fell 0.4 per cent to 638.83 points, with utilities leading losses after dropping 1.1 per cent. The decline comes as markets continue to assess whether rising geopolitical risks could outweigh signs of improving corporate performance across the region.
The latest fall has also extended the STOXX 600's recent weakness. The benchmark index is now down about 2 per cent from the record high it reached on July 3, as investors grow increasingly cautious about the economic impact of renewed hostilities between the US and Iran.
Markets caught between earnings and uncertainty
European technology stocks came under pressure despite encouraging news from Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest producer of advanced AI chips.
TSMC reported a record 77 per cent jump in second-quarter profit, highlighting continued global demand for artificial intelligence infrastructure. However, the strong results failed to lift sentiment in Europe.
Dutch chip equipment maker ASML erased early gains, while STMicroelectronics fell around 3 per cent and BE Semiconductor lost about 2 per cent. The technology sector has shown signs of cooling this month after a strong performance in the previous quarter.
Investors are also watching what is expected to be Europe's strongest earnings season in more than three years. Even so, some analysts believe concerns over Europe's relatively limited exposure to the fast-growing AI sector, compared with the US, continue to weigh on market sentiment.
Michele Morganti, senior equity strategist at Generali Investments, reportedly said the firm remains slightly overweight on European equities provided tensions in the Middle East begin to ease. He reportedly added that a calmer geopolitical environment could support stronger economic momentum and corporate earnings across the region.
Meanwhile, data from LSEG suggested investors have increased expectations that the European Central Bank could raise interest rates by 25 basis points before the end of the year as higher energy prices threaten to keep inflation elevated.
Big corporate moves shape the trading session
Among individual companies, Delivery Hero slipped 0.6 per cent after Uber announced a public takeover offer valuing the German food delivery company at about $14.8 billion. Delivery Hero's shares have already gained nearly 70 per cent this year following reports that a bid was imminent.
Engineering company ABB fell 3.3 per cent after announcing a $5.5 billion acquisition of British automation specialist Rotork, despite reporting second-quarter operating profits that exceeded market expectations. Rotork's shares surged 66 per cent following the announcement.
Elsewhere, Swedish industrial technology group Indutrade climbed 11.6 per cent after posting stronger-than-expected quarterly earnings.
Norwegian telecom operator Telenor dropped 11.6 per cent after lowering its 2026 outlook following weaker-than-expected second-quarter results.
French advertising giant Publicis rose 1.4 per cent after reporting higher first-half revenue, supported by growing demand for AI-powered marketing services.
For now, markets appear to be weighing solid corporate earnings against a broader backdrop of geopolitical uncertainty, with investors closely watching whether the conflict in the Middle East leads to another round of inflationary pressure across Europe.
