European shares steady as tech gains offset Middle East caution

European shares closed flat on Monday, with technology stocks offsetting declines in construction firms, as investors weighed the durability of a U.S.-Iran ceasefire.

European shares closed flat on Monday, with gains in technology stocks offset by declines in construction firms, while investors mulled the durability of a U.S.-Iran ceasefire after the two countries halted the latest bout ‌of hostilities. The pan-European STOXX 600 index closed 0.1% higher, after narrowly marking gains last week.

The selloff in technology stocks, which pushed the sector to its sharpest weekly fall since mid-March, stabilized on Monday with a 1.2% gain. Chip stocks such as STMicroelectronics added 2.4%. Europe's exposure to AI stocks is much smaller than the ‌United States' and Asia's, where tech-driven rallies pushed regional benchmarks to record highs several weeks earlier. "For us to start upgrading European stocks, we need ‌to start seeing AI-driven productivity have an impact on European earnings. So far, we're not there yet," said Florian Ielpo, head of macro and multi-asset portfolio manager at Lombard Odier Investment.

Still, the European tech sector has benefitted from the global AI rally, putting it on track for the biggest quarterly gains on the STOXX 600. It has also outperformed the U.S. S&P 500 ⁠tech sector ​at a time when worries about debt-backed ⁠spending weigh on Asian and Wall Street stocks. Meanwhile, crude prices edged up slightly to $72 a barrel as investors assessed shipments through the Strait of Hormuz, with a tenuous interim ceasefire ⁠prevailing between the U.S. and Iran. The countries traded fire through the weekend before agreeing to halt hostilities and renew talks. "Despite short-term violations, the U.S. and Iran will ​agree to a deal ... we do not think that a deal would provide a long-term solution, but is more likely to be a ⁠patch to get oil flowing through the Strait," said Mohit Kumar, an economist at Jefferies. The truce has prompted bullish outlooks from brokerages. J.P. Morgan was the latest to lift its year-end target ⁠for ​European equities.

Focus this week will be on the European Central Bank's Sintra conference, where speakers include Federal Reserve Chair Kevin Warsh and ECB President Christine Lagarde. Traders are pricing in one more ECB rate hike of 25 basis points later this year, LSEG-compiled data showed. Dutch digital services operator Prosus gained ⁠2.4% after reporting an 84% rise in full-year adjusted core profit. Private equity firm Bridgepoint rose 16% after agreeing to acquire U.S. real estate investment platform ⁠Kayne Anderson Real Estate for an enterprise ⁠value of $1.39 billion.

Shares of Heidelberg Materials fell 9.4% after the construction firm on a call warned of a weak second quarter, a trader said. Deutsche Telekom slipped 5.5% after German daily Handelsblatt reported CEO Tim Höttges is actively working on plans to ‌merge the group ‌with T-Mobile.