Tech selloff, defence weakness weigh on European shares

Losses in technology shares dragged the European benchmark stock index lower on Thursday as investors assessed the outlook for the sector following a Democratic sweep in the US ‌midterm elections, while weakness in the defence sector exacerbated the decline. The pan-European STOXX 600 index closed 0.38% lower at 654.87 points, having pulled back from close to an all-time high earlier in the session. Regional bourses were mixed however, with French and Spanish benchmark indexes ending higher.

Technology stocks fell 3.2% to their lowest ‌level in nearly two months, tracking losses on Wall Street where the tech-heavy Nasdaq is poised to confirm a correction. Chip-linked stocks were among the ‌biggest decliners on the STOXX 600, with Soitec slumping 16.7% while Infineon fell 8.5% and Aixtron declined 9.8%. AI heavyweight ASML retreated 6.6%, and Siltronic slid 12.3%.

"It's really a story of a rotation happening from technology to non-technology and from the US to non-US markets as a result of the midterm elections and the very aggressive Democratic sweep," said Ipek Ozkardeskaya, senior analyst ⁠at Swissquote Bank. Uncertainty ​prevailed over the outlook for the ⁠global technology sector on concerns that increased scrutiny over data centre buildout could slow down spending on developing AI, although analysts highlighted that existing orders are unlikely to be affected.

"Concerns about a ⁠potential tightening of artificial intelligence regulations have not disappeared, but they appear to be offset for now by robust investment in data centres and resilient corporate earnings," said John ​Plassard, head of investment strategy at Cité Gestion, in a note. Defence stocks fell 2.6%, weighed down by a 16.1% drop in Rheinmetall after ⁠the company cut its 2026 sales forecast for the second time in three months.

Expectations immediately after the US midterm results were high that efforts to end the Iran conflict could be ⁠accelerated, while ​the Democrats could keep a check on excessive fiscal spending and policies targeting sectors such as European banks and clean energy. However, Brent crude rose more than 2% on Thursday as investors weighed the future course of the Iran war, further dampening sentiment in Europe, an energy importing region.

Air France-KLM ⁠gained 12% after beating third-quarter earnings expectations, while renewable energy firm Orsted rose 3.5% after its strong results. Aker BP fell 5.6% after BP sold ⁠a 5% stake in the Norwegian oil ⁠and gas company.

In the UK, the Bank of England raised interest rates for the first time in over three years on Thursday and warned that at least one more increase was likely if the US-Iran conflict continues. The ‌FTSE 100 closed ‌0.43% lower.