UPDATE 2-European shares end near two-week highs on defence, tech boost

European shares finished near two-week highs on Wednesday,aided by defence and technology stocks, as investors awaited a critical earnings report from U.S. chip giant Nvidia, and while caution remained on the U.S.-Iran ‌standoff in the Middle East. The pan-European STOXX 600 ended 1.5% higher at 620.29 points, with major indexes in the region including Germany and France up over 1.4% each.

European shares finished near two-week highs on Wednesday,aided by defence and technology stocks, as investors awaited a critical earnings report from U.S. chip giant Nvidia, and while caution remained on the U.S.-Iran ‌standoff in the Middle East.

The pan-European STOXX 600 ended 1.5% higher at 620.29 points, with major indexes in the region including Germany and France up over 1.4% each. Global investors are keen on AI bellwether Nvidia's results coming after the U.S. markets close later in the day that could offer clues ‌into how demand for AI infrastructure was faring.

Reuters reported that ASML expects the booming global semiconductor market to be "tense" with tight supply ‌as demand from AI, satellites and robots outpace what the industry can produce. The chip-making machine giant's shares were up 6.7%. More broadly, European technology stocks jumped 2.9%, and the sector has seen the biggest gains this quarter on the STOXX 600. Semiconductor shares such as ASM International and STMicroelectronics were up 3.9% and 6% on Wednesday.

"ASML has rather lagged the ⁠rally that ​we've seen in semiconductors as a whole. ⁠So we think there's scope for strong earnings momentum there," said Paul Wild, European equity fund manager at J O Hambro Capital Management. "I'd be a little bit more ⁠cautious in terms of some of the chip companies themselves," he said, adding that valuations among EU semiconductors have surged.

Wild said AI equipment stocks such as ​Legrand and Schneider Electric offered better exposure to the global rally. Both stocks were up over 3%. Still, given Europe's small AI tech ⁠exposure, the sector's gains have not been able to lift the STOXX 600 to record highs, similar to the rallies seen in the U.S. and Asia.

Meanwhile, investors also were ⁠keen ​on any progress on U.S.-Iran negotiations after President Donald Trump asserted the war would be over "very quickly". Defence shares jumped 3.2% and led sectoral gains, with Czech firm CSG adding 8.7% after its first-quarter results. UK's Babcock rose 5.3% after brokerage Peel Hunt upgraded the stock to "buy" from "add".

Retailer ⁠Marks & Spencer jumped 6.6% after forecasting profit growth for the next year despite a slide in annual profit due to a cyber hack disruption. Norwegian ⁠industrial investment company Orkla slumped almost ⁠6% after posting a profit decline warning on increasing expenses amid the Middle East conflict.

Meanwhile, the European Union struck a provisional agreement to remove import duties on U.S. goods, as part of a trade deal with ‌Washington last July.