European shares drop as global tech selloff, Middle East conflict weigh

FRANKFURT: European shares fell on Friday, tracking a loss in global markets on the back of a chip-stock selloff and an escalating Middle East conflict.

Investors rushed out from highly volatile tech stocks from Japan to Europe, taking cover in sectors that have lagged so far this year, as the uncertainty over AI investments played out. Strong forecasts from AI industry leaders such as chip equipment maker ASML and Taiwan’s TSMC this week did little to stem the weakness. While Japan’s Nikkei confirmed a correction on the day, Wall Street’s Nasdaq futures slid over 1 percent.

The pan-European STOXX 600 index was down 0.6 percent at 639.49 points by 0849 GMT and is on track to log a small weekly decline, taking its two-week loss to about 2 percent.

Europe’s tech sector shed 2.3 percent and led sectoral declines, with chipstocks Soitec, ASMI and ASML dropping between 4 percent and 6 percent.

In contrast, utilities stocks rose 1.3 percent, while luxury is the best-performing sector this week.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, believes this run to cover is unlikely to last.

“The rotation trade is threatened today by rising yields, rising borrowing costs and geopolitical tensions, because both smaller companies and the non-technology pockets of the market remain more vulnerable than their big technology peers,” said Ozkardeskaya.