FRANKFURT: European shares slipped on Friday 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 percent at 622.66 points and lost 0.5 percent for the week. Brent crude fell for a second straight session, though prices remained near USD93 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 Hezbollah rejected the pact. The resulting spike in energy costs has complicated the inflation outlook.
Data this week showed euro zone inflation accelerated in May, prompting markets to price in a 25-basis-point interest rate hike from the European Central Bank 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 percent drop, following a rally that has helped the shares gain about 30 percent 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.
European chip stocks such as Infineon and Aixtron lost 9.1 percent and 4.8 percent, respectively, while AI equipment makers Legrand and Schneider Electric slipped 2.3 percent and 4.5 percent, 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.
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