European shares pause after rally as concerns over Fed rates, Iran peace deal linger

FRANKFURT: European shares slipped on Wednesday, after a strong finish to the second quarter, as investors assessed indications that US interest rates could stay higher for longer, and the progress of US-Iran peace talks.

The pan-European STOXX 600 index closed 0.4percent lower after logging its strongest quarter since October 2020 in the previous session. The STOXX tech index pulled back 1.2percent after logging its strongest quarterly performance since late 2001 in the previous session, with valuations now at par with Wall Street rivals.

Chip equipment maker ASML dropped 4.6percent, while semiconductor stock Soitc slipped marginally.

AI equipment maker Schneider Electric lost 3.1percent after signing an agreement to acquire Cognite Holding, a privately held AI software and industrial data provider, for USD3.1 billion in an all-cash deal. “We still like the tech sector even going forward… It will keep being some sort of a driver, both in terms of earnings growth and performance,” said Luca Finà, head of active equity at Generali Asset Management.

Finà expects the earnings growth differential between European and US stocks to narrow in the upcoming quarters, potentially bringing back international flows and powering strong performances in Europe. Meanwhile, Federal Reserve Chair Kevin Warsh said at the European Central Bank’s Sintra conference that policymakers will decide whether to raise interest rates when they begin their next meeting, reiterating his stance on not giving forward guidance.