European markets edge higher as tech shares lift sentiment despite Iran concerns

European stock markets edged higher on Thursday (14 May) as technology shares boosted sentiment, although investors remained cautious over stalled U.S.-Iran talks and a closely watched summit between Washington and Beijing.

The pan-European STOXX 600 index rose 0.4 per cent to 613.98 points by mid-morning trading, building on Wednesday’s 0.8 per cent gain. Germany’s DAX climbed 1.2 per cent, while Britain’s FTSE 100 was broadly flat despite stronger-than-expected economic data showing the UK economy expanded by 0.3 per cent in March.

Trading activity remained subdued, with several European markets closed for public holidays.

Markets caught between AI optimism and war fears

Markets are balancing optimism around artificial intelligence with fears of wider instability in the Middle East. U.S. President Donald Trump is expected to press China to help end the Iran conflict after negotiations between Tehran and Washington stalled.

“We await the developments in China. But really the focus is on AI,” said Frédérique Carrier, head of investment strategy at RBC Wealth Management. “All eyes are on the Middle East crisis for that to really be resolved.”

Technology stocks were among the strongest performers. Europe’s technology index gained 1 per cent, helped by semiconductor companies including STMicroelectronics, ASM International, BE Semiconductor Industries and Infineon Technologies, which rose between 1.4 per cent and 2.8 per cent.

The rally reflects growing confidence that companies linked to AI and data centres will continue to benefit from heavy investment. However, European shares remain below the levels seen before the outbreak of the Iran conflict, while U.S. markets have already returned to record highs.

Carrier said Europe’s earnings season had been solid, particularly for banks and industrial firms linked to electrification and data centres, although it “pales in comparison” with the stronger performance seen in the United States.

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Mixed picture for major companies

Among individual companies, Burberry fell 4.7 per cent after reporting fourth-quarter sales in line with expectations. Watches of Switzerland jumped 14 per cent after forecasting full-year operating profit above market expectations.

Investment group 3i Group dropped almost 16 per cent following its results, dragging the financial services sector down 0.8 per cent.

Meanwhile, Legal & General rose 5.2 per cent after the Financial Times reported that the company was not considering a sale.

ECB rate worries return

Investors are also reassessing the outlook for interest rates after European Central Bank chief economist Philip Lane signalled that further rate rises may be needed to tackle inflation.

Money markets are now pricing in more than two ECB rate increases this year, with the first expected in June.

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News Europe stock markets Artificial Intelligence Technology Middle East conflict