European shares pause after rally, doubts linger over Iran peace deal

European shares slipped on Wednesday, as signs that peace talks between Iran and the United States hit a new stalemate spurred caution after a strong finish to the second quarter.

The pan-European STOXX 600 index slipped 0.1% to 640.79 points by 0825 GMT after logging its strongest quarter since October 2020 in the previous session.

Technology stocks were broadly mixed after the STOXX tech index logged its strongest quarterly performance since late 2001 on Tuesday, with valuations now at par with Wall Street rivals.

Chip equipment maker ASML was steady, while semiconductor stock Soitc jumped 5.2%. AI equipment maker Schneider Electric lost 2.2% after signing an agreement to acquire Cognite Holding, a privately held provider of AI software and industrial data, for $3.1 billion in an all-cash deal.

“We still like the tech sector even going forward” said Luca Finà, head of active equity at Generali Asset Management.

“It will keep being some sort of a driver, both in terms of earnings growth and in terms of performance.”

Finà also expects international flows to return, helping power strong performance in Europe broadly, on expectations that the earnings growth differential between the stocks in the region and their U.S. counterparts could narrow in the next two or three quarters.

Focus will be on the European Central Bank’s Sintra conference later in the day, where U.S. Federal Reserve chair Kevin Warsh and ECB President Christine Lagarde are expected to speak.

Traders anticipate both major central banks to lift interest rates by at least 25 basis points each later this year, LSEG-compiled data showed. While crude oil prices have fallen back to pre-Iran war levels, concerns remain that price pressures will linger.

Against this backdrop, Iran said it would not meet with top U.S. envoys who flew to the region following an outbreak of hostilities, clouding the prospects for a lasting peace between the two countries.

Investors are keeping a close eye on how companies are affected by the conflict. Primark owner Associated British Foods slipped 2% after saying it still expects annual profit to be below the prior year’s outcome.

Swedish defence equipment maker Saab gained 4.2% after signing a contract to deliver 16 Gripen E fighter aircraft to Ukraine in a deal worth about 24.6 billion Swedish crowns ($2.54 billion).

Shares of sportswear makers Adidas and Puma fell over 1% each after U.S.-rival Nike issued a cautious outlook on persistent weakness in China.