Investing.com – European shares traded mostly lower on Wednesday as escalating military action in the Middle East drove oil prices 3% higher and a deepening sell-off in global technology stocks offset a wave of strong earnings reports across European banking, luxury, and mining heavyweights.
The pan-European index dropped 0.3%.
Germany’s declined 0.1%, while France’s fell 0.6%. London’s rose 0.3% and Spain’s dropped 1.7%.
However, solid corporate balance sheets were unable to fully shield indexes from macro headwinds. Fixed-income markets remained under visible pressure, with elevated sovereign bond yields reflecting widespread investor nervousness ahead of the Federal Reserve’s monetary policy decision later in the day.
While the Fed is widely expected to keep benchmark interest rates unchanged, money markets are pricing in roughly a 1-in-3 chance of an unexpected rate hike or hawkish forward guidance, driven by persistent inflation concerns, fresh trade tariffs, and rising energy prices.
Market sentiment soured overnight after joint U.S. and Saudi airstrikes targeted Iran-backed groups in Iraq blamed for recent drone attacks on Saudi oil facilities.
Tehran warned that attributing the attacks to Iran was a “major miscalculation,” sparking a fresh wave of risk aversion. Energy markets responded swiftly, with jumping more than 3% after Iranian ballistic missile launches were intercepted in regional airspace, reviving fears of prolonged supply disruptions and sticky energy inflation.
Compounding the geopolitical tension, European tech stocks fell, tracking a deepening Asian semiconductor rout triggered by ’s quarterly operating profit miss.
The disappointing print from the key artificial intelligence memory supplier reignited broader market anxieties over lofty AI valuations, ballooning capital expenditure budgets, and tech companies’ ability to beat elevated market expectations by wide margins.
The semiconductor slump comes at a sensitive moment for global equity markets, with Wall Street giants and scheduled to report quarterly results later in the day.
“The risk, therefore, is that investors are paying lofty valuations for record earnings. This may be all well and good if the earnings materialise, but there could be trouble ahead if they do not,” said AJ Bell’s investment director, Russ Mould.
Geopolitical risks and tech jitters were weighing on an unusually dense slate of blockbuster corporate earnings across Europe.
In banking, lifted its full-year income targets after a boom in wealth management powered an earnings beat, sending its shares up 4.9%. Swiss giant also beat second-quarter net profit expectations, rising 1.8%, while Spain’s topped quarterly earnings estimates.
Across luxury and consumer sectors, surged nearly 15% after flagship brand Gucci reported a smaller-than-expected decline in quarterly sales.
Eyewear giant beat first-half profit estimates, but fell 2.9%, while mining giant posted its highest first-half earnings in four years, gaining 1.6%. Healthcare firm raised its full-year margin outlook alongside plans for a $2.5 billion restructuring program.