European shares rise as banks, healthcare rally; investors weigh geopolitics, AI impact

FRANKFURT: European shares closed higher on Tuesday as financials and healthcare stocks led the market rally, while investors tracked geopolitical negotiations and assessed how AI disruptions could reshape business models.

The pan-European STOXX 600 index rose 0.5percent to 621.29 points. Switzerland’s SMI gauge rose 0.7percent to a record high. Banks extended gains from the previous session, rising 1.3percent, rebounding from recent pressure despite being among last year’s top performers.

Healthcare stocks jumped 1.4percent to their highest levels since September 2024, while the real estate sector index advanced 1.8percent to reach its strongest point since October. Geopolitics took centre stage as Iran’s foreign minister said the US and Iran reached an understanding on key “guiding principles” during a second round of indirect nuclear talks.

Separately, US-mediated peace negotiations between Ukraine and Russia began in Geneva, focusing on the contentious issue of territorial control.

Against this backdrop, defence stocks slipped 0.2percent. Energy shares fell 0.6percent as Brent crude dropped more than 1percent, while the basic materials sector declined 1.6percent amid weakness in gold, silver, and copper prices.

Investor sentiment has been shaken recently over concerns that artificial intelligence applications could pressure margins in traditional businesses. The fresh AI-driven jitters have rippled across sectors, including software, insurance and trucking.

“The market is just trying to find which companies could be disrupted by AI,” said Roland Kaloyan, head of European equity strategy at Societe Generale.

“And so what we are seeing is that the market has started to build a risk premium, because honestly, no one knows exactly what the impact will be for each company - if the company will be able to take advantage of AI or will have a part of the business that could be disrupted.” However, European markets managed to buck the negative global trend on Tuesday.

Sectors that had taken a hit at the height of the selloff in Europe such as media, insurance and technology were up between 0.8percent to 0.9percent.

Among other movers, miner Antofagasta posted a 52percent jump in annual core profit, but its shares dropped 3.4percent and analysts pointed to the dividend falling short of expectations and softer copper prices on Tuesday.

Avolta added 5percent after UBS upgraded its recommendation on the Swiss travel retailer to buy from neutral. BFF Bank dropped 11.8percent to a record low as sources said investigations were ongoing into alleged false accounting at the lender.