Wednesday marked the third consecutive day of decline for European shares, spurred by worries surrounding potential trade disputes between the US and China and resulting in a negative impact on chip stocks. All eyes are now on the imminent interest rate decision from the European Central Bank.
The Unified European STOXX 600 index experienced a decrease, ending 0.5 per cent lower than its position last week. This resulted in a drop of 4.5 per cent for the technology sub-index, its most significant single-day dip since December 2022.
Global computer chip equipment vendor, ASML (a Dutch organisation), recorded a rather severe 11 per cent drop in their shares—the most dramatic single-day fall in over four years. Worries about stringent export restrictions to China, as pressured by the US government, seemed to overshadow the company’s second-quarter earnings results.
Bloomberg news highlighted reports that the US may resort to harsher trade restrictions if firms continue to allow China access to advanced semiconductor technologies, despite resistance from allies to such a chip clampdown.
Similarly, shares in both ASM International and BE Semiconductor decreased by more than 7 per cent.
The Iseq index in Dublin experienced a slight decline, similar to other places. Ahead of Datalex’s AGM and release of results, the travel software company’s shares dropped 7 per cent to 44 cent. A notable advising firm proposed that shareholders of Datalex vote against the company’s remuneration report at the AGM after the new CEO received a sign-on incentive and early-activation stock options. Ryanair and Hotel Group Dalata also experienced a decline in their share prices of 1 per cent and 1.3 per cent, respectively.
As for economic data, figures for June reveal a 2.5 per cent year-on-year inflation rate for the eurozone, preceding the European Central Bank’s rate-setting meeting later this week where a steady rate is expected. UK inflation rates remained at 2 per cent in June, despite predictions for a minor fall. In contrast, the UK’s FTSE 100 blue-chip closed 0.3 per cent higher. German sportswear giant Adidas enjoyed a 2.1 per cent increase in their shares after predicting a better-than-expected earnings forecast in Q2. Shares in Puma, their competitor, also rose slightly by 2.2 per cent.
Roche, the Swiss pharmaceutical company, saw a boost of 5.8 per cent to its shares after positive early-stage trial outcomes from a second potential drug following its acquisition of Carmot Therapeutics, putting it in the competition for crafting drugs to combat obesity. Conversely, the shares for the main rival, European biggest listed company, Novo Nordisk, dropped by 5.3 per cent.
Demant, the Danish hearing aid producer, had a 14.8 per cent slump in their shares after lowering their yearly forecast. In contrast, Munters, Swedish air treatment company, witnessed a surge of 22.4 per cent due to its better than predicted second-quarter earnings.
The London FTSE 100 Index saw an uptick, closing higher last Wednesday. This was driven by rising geopolitical threats stimulating growth in defensive sectors such as healthcare and consumer merchandise, in conjunction with a stronger than projected UK inflation data which delayed expectations of interest rate reductions by the Bank of England (BoE). Despite an earlier dip of 0.4 per cent, FTSE 100 eventually rose by 0.3 per cent.
Global investor sentiment was shaken as US presidential candidate Donald Trump cast doubt on US backing of Taiwan, alongside a potential stricter US control over advanced semiconductor technology exports to China. Consequently, tech stocks worldwide faced a significant blow, while defensive holdings, typically preferred during economically challenging periods, saw an increase. Furthermore, data revealing a steady UK inflation rate of 2 per cent, contrary to expectations of a minor decrease, heightened speculation over the BoE’s initiation of monetary policy relaxation cycle. There was also a hike of 0.8 per cent in energy stock following a rise in oil prices due to a weak dollar and diminished US oil reserves. However, Antofagasta suffered a 6.1 per cent drop after the Chilean mining firm projected its full-year copper output at the lower end of its guidance range.
On Wednesday, the Nasdaq fell over 2 per cent to a fortnightly low triggered by a slump in massive chip and tech stocks, anticipating stricter US trade regulations focussing on China. In contrast, the Dow set a new high record. A report indicating the Biden Administration’s contemplation of stringent trade restrictions as a chip crackdown on China resulted in a steep decline in the semiconductor stocks. This sent the Philadelphia SE Semiconductor index down 4.9 per cent to a fortnight low and the tech-dominated Nasdaq on track for its most significant slump since December 2022.
Nvidia, a preferred AI-chip company, underwent a 6.2 percent decrease whereas ASML’s US-listing experienced a significant 11.4 percent fall. Despite this, the Dow showed resilience by accomplishing an intraday record high, assisted by a 3.3% boost from Johnson & Johnson following the outperformance of their second-quarter results. This update includes additional information from Reuters.