European stocks clocks biggest quarterly gain in over five years

FRANKFURT: European shares registered their biggest quarterly rise in more than five years on Tuesday, boosted by optimism around artificial intelligence and signs of easing tensions in the Middle East.

The pan-European STOXX 600 index closed 0.9 percent higher, after hitting an intraday record high. The benchmark marked a third consecutive monthly gain and climbed 10 percent for the quarter, its strongest such performance since October 2020.

Most major STOXX 600 sectors were higher on Tuesday, with technology stocks leading the charge with a 2.5 percent gain. They clocked their biggest quarterly jump since October 2001, underscoring robust demand for AI infrastructure. The sector is also on track to outperform its Wall Street counterpart this month and quarter.

Chip equipment maker ASML rose 6.8 percent on Tuesday, while chipmakers STMicroelectronics and Infineon added 1.4 percent and 4.4 percent, respectively. Shares of Siemens Energy added 5.6 percent after the AI equipment maker reiterated strong demand trends at a quarterly earnings call on Monday.

“What’s different about Europe is: you’re not paying for that (economic) growth commonly … and with companies that are less exciting than US tech, or maybe Asian semis, that’s creating quite a lot of opportunities in attracting value stocks,” said Rob Lancastle, portfolio manager at J O Hambro Capital Management.

“Around the rest of the world, you often pay a lot more and you have a lot more earnings risk,” he added.

Global equities have rallied this quarter on AI enthusiasm, with the US and Asia at the forefront, while Europe’s smaller exposure to the tech sector has resulted in it playing catch up for most of this period.

Signs of easing Middle East tensions have also been a key driver this quarter as prices of oil slipped to pre-Iran-war levels, prompting Barclays and J.P.Morgan to turn bullish on European stocks.

Travel and leisure stocks, which had taken a hit due to the conflict, also bounced back and were up over 19 percent this quarter — their biggest jump since January 2023.